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Case 3:17-cv-02995-L Document 1 Filed 10/30/17 Page 1 of 30 PageID 1

IN THE UNITED STATES DISTRICT COURT


FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

EMF SWISS AVENUE, LLC,



Plaintiff,

v. CIVIL ACTION NO.

CITY OF DALLAS,


Defendant.

PLAINTIFF EMF SWISS AVENUE, LLCS ORIGINAL COMPLAINT AND


APPLICATION FOR TEMPORARY RESTRAINING ORDER,
PRELIMINARY INJUNCTION, AND PERMANENT INJUNCTION

TO THE HONORABLE JUDGE OF SAID COURT:

Plaintiff EMF Swiss Avenue, LLC (EMF or Plaintiff) files this Original Complaint

and Application for Temporary Restraining Order, Preliminary Injunction, and Permanent

Injunction against Defendant City of Dallas (the City or Defendant). Plaintiff respectfully

shows the Court as follows:

I. PARTIES

1. Plaintiff is EMF Swiss Avenue, LLC. EMF is a Delaware limited liability

company with its principal place of business in the city of Dallas, Dallas County, Texas. EMF is

the owner of 4217 Swiss Avenue, Dallas, Texas 75204 (the Property).

2. Defendant is the City of Dallas. The City of Dallas is a municipal corporation

organized and existing under the laws of the State of Texas. The City can be served with process

through its mayor, clerk, secretary, or treasurer at the Citys offices at 1500 Marilla St., Dallas,

Texas 75201.

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II. JURISDICTION AND VENUE

3. This Court has federal question jurisdiction pursuant to 28 U.S.C. 1331 because

this suit concerns the federal question of whether the City of Dallas has committed a taking

against EMF under the Fifth and Fourteenth Amendments to the United States Constitution.

This Court has supplemental jurisdiction over EMFs additional claims pursuant to 28 U.S.C.

1367.

4. Plaintiffs claim for injunctive relief is authorized by Rule 65 of the Federal Rules

of Civil Procedure and by the general legal and equitable powers of this Court.

5. Venue is proper under 28 U.S.C. 1391(b)(2) because a substantial part of the

events or omissions giving rise to these claims occurred in the Northern District of Texas.

III. INTRODUCTION

6. This lawsuit seeks relief narrowly-tailored in scope and of the highest urgency.

The City of Dallas (hereinafter, the City) has, sua sponte and prematurely issued, a Stop Work

Order precluding all construction of any kind on a multi-million dollar development Property

located in Dallas County. The preclusive effects of this Stop Work Order are disastrous and

have caused and will continue to cause irreparable harm to EMF and the construction project on

its Property through indefinite construction delays, dispersal of the construction workforce,

potential lender defaults, and lost construction capital and pricing. The need for injunctive relief,

therefore, is immediate and necessary to enjoin the Citys impermissible taking of EMFs

Property in violation of EMFs rights under Texas law and the United States Constitution.

7. Beginning in 2014, EMF undertook the rigorous process of obtaining building

permits from the City to construct a 253-unit apartment complex (the Project) at 4217 Swiss

Avenue, Dallas, Texas 75204 (the Property). EMF is the owner of the Property. EMFs

Project will bring badly needed high-quality rental housing to the City, while increasing the
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Citys density and walkabilityboth of which are deemed desirable traits by almost all urban

planners. EMF successfully secured the necessary building permits from the City. In good faith

reliance upon those City-issued permits, EMF began investing millions of dollars to develop the

Project, including commencing construction on the Property. Long after the Project on EMFs

Property began (including construction), a local homeowners association challenged the permits

issued by the City for the Project.

8. Non-party Peaks Addition Home Owners Association (HOA) filed a

complaint concerning the validity of the permits issued by the City for the Project on EMFs

Property to the Director of Sustainable Development and Construction for the City of Dallas (the

Director). Acting on behalf of the City, the Director rejected the HOAs challenge.

9. Following the Directors rejection of its complaint, the HOA then appealed that

decision to the Board of Adjustment for the City of Dallas (the Board). The Board

overwhelmingly upheld the Directors decision and confirmed that the City had properly issued

the permits for the Project on EMFs Property in a 4-1 vote. EMF was never joined as a party to

the proceedings before the Director and the Board, nor did the HOA ever seek any affirmative or

injunctive relief against EMF.

10. In further and reasonable reliance on the decisions by the Citys Director and the

Board upholding the validity of the already-issued building permits, EMF continued to invest

massive resources and employ hundreds of workers to construct the Project on its Property.

Despite being fully aware that building permits had been issued for the Project on EMFs

Property, the HOA at no time attempted to stop, enjoin, or suspend construction of the Project by

requesting or obtaining injunctive relief against the City, EMF, or anyone else. To dateand

acting in reasonable reliance on the building permits issued by the City, confirmed by the

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Director and affirmed by the Board EMF has spent over $13.9 million dollars in its

construction costs for the Project on its Property.

11. Following the Board decision upholding the validity of the permits issued by the

City, the HOA initiated a state court action against the City and the Board appealing the Boards

decision that the permits were valid (the HOA Suit). There are two critical points regarding

the HOA Suit: (1) the HOA did not seekand did not obtainany injunctive relief to suspend

construction of the Project on EMFs Property; and, (2) the HOA did not name EMF or any other

private party (such as EMFs parent company or its construction contractor or sub-contractors) as

parties to that suit. Instead the HOA sued only the City and the Board, and it did not seek

injunctive relief against either. The HOA alleged that both the City and the Board had both

abused their discretion in issuing and affirming the building permits for the Project on EMFs

Property.

12. Although never named as a party by the HOA, EMF ultimately intervened in the

HOA Suit and asked to be heard. However, just three days after EMF intervened in the HOAs

State Court Lawsuit on September 11, 2017, the HOA was granted summary judgment on its

challenge to the validity of the building permits issued by the City and affirmed by the Board for

the Project on EMFs Property. Butagain, and criticallythe HOA never requested and was

not granted any injunctive relief that would prevent construction from continuing. Moreover, the

State Courts September 11, 2017 Summary Judgment (the State Court Judgment) does not

contain any command or declaration to stop work on the Project on EMFs Property, not does it

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order the City of Dallas or the Board to take any actions regarding the building permits for the

Property.1

13. On September 14, 2017, three days after the State Court Judgment was rendered,

the Cityon its own initiative and without any order from the State Trial Courtissued a

stop work order (the Stop Work Order) that required an immediate halt on construction of

the Project on EMFs Property. The City did not, and has not, disclosed its basis or reasoning for

issuing this Stop Work Order against construction on the Project. The ramifications of the Citys

sua sponte Stop Work Order are devastating and irreparablenot only to EMFs business but

also to numerous innocent third-parties. The irreparable harms flowing from the Citys Stop

Work Order include:

Hundreds of blue collar workers hired to build the Project will abruptly lose
their paychecks;

EMFs carefully assembled and scheduled construction workforce will


disperse, and could only be reassembled at great cost and with substantial
delay;

Unable to complete the Project, EMF could potentially default on its HUD
loan for the Project, and consequently the other HUD loans EMFs parent
company, Encore Multi-Family, LLC (Encore), could be in jeopardy and
prevent Encore from receiving HUD or FHA loans in the future;

Foreign investors in the Project will potentially lose their visas secured
through the federal EB-5 program;

EMF risks the loss of negotiated and agreed-upon pricing for labor and
materials provided by its subcontractors and vendors, particularly in the wake
of the reconstruction efforts in South Texas rebuilding from the devastation
caused by Hurricane Harvey, which has resulted in labor and material
shortages and construction cost increases;

1
A true and correct copy of the Final Judgment is attached hereto as Exhibit 1-B, and
incorporated herein by reference.

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EMF will incur extremely costly interest payments and penalties on its HUD
loan and its private loans; and,

Because construction is being stopped midstream, the structures partially


completed on EMFs Property will be injuriously exposed to the elements and
be subjected to potential theft and vandalism.

14. The Stop Work Order issued by the City was not required by the State Court

Judgment. Indeed, in open court the State Court Judge repeatedly confirmed that his State Court

Judgment did not contain an injunction (or cause the effect of injunctive relief) and did not

require the City to enter a Stop Work Order against the construction on the Project at EMFs

Property. In sum, no court compelled or mandated that the City issue the Stop Work Order, and

the City bears sole responsibility for its independent decision to do soa decision which wholly

disrupted the status quo as of the time the State Court Judgment was entered.

15. The issuance of the Stop Work Order was an independent act taken by the City

that has deprived EMF of numerous rights and constitutes an improper taking of EMFs

property. Ostensibly facing extreme political pressures locally, the City placed the entire Project

at risk by acting on its own to issue a Stop Work Order against the Project during the middle of

construction when over $13.9 million has already been expended on that construction. In turn,

the City has committed an impermissible taking of and against EMFs Property, and has

materially reduced (if not completely destroyed) both the value and utility of EMFs Property,

which now contains a partially completed construction Project on which the City has forbidden

further work.

16. In addition to committing a taking of EMFs Property, the Citys sudden and

independent issuance of the Stop Work Order deprived EMF of important substantive and

procedural rights for which EMF lacks any adequate remedy at law. For example, given that no

injunctive relief was ever sought by the HOA or issued in the HOA Suit, the State Trial Court

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enjoys plenary power for, at minimum, 30 days from the date the judgment was signed until the

judgment becomes executable. By issuing its Stop Work Order a mere three days after the State

Court Judgment was signedwhen no order, injunction or declaration required it to do sothe

City deprived EMF of its ability to maintain the status quo (e.g., the filing of post-judgment

motions and an appeal secured by a supersedeas bond, as are its lawful rights). In short, by

needlessly issuing the Stop Work Order the City deprived EMF of the ability to continue work

on the Project at its Property during the pendency of an appeal of the State Court Judgment and

deprived EMF of any adequate remedies at law.

17. There are important and severe public policy implications to the Citys decision to

issue the Stop Work Order against a $60 million project in the middle of construction. The

Project being constructed on EMFs Property received all necessary building permits from the

City of Dallas, and the validity of those permits was subsequently affirmed by the Citys Board

of Adjustments. Taking the City at its word and in reliance upon these prior approvals, EMF

commenced construction on the Project, which, when completed, will bring desperately needed

high-quality rental housing to the Citys core (increasing the Citys density and walkability in the

process). Despite being fully aware of EMFs multimillion dollar investment in the Property, the

City has now issued a Stop Work Order without being compelled to do so by any court. Against

this chaotic and uncertain backdrop, no rational developer will want to commit millions of

dollars to a construction project when the City could needlessly issue a stop work order without

any requirement for doing so. And this is all the more true given the stiff competition for

development dollars that the City of Dallas constantly faces from its neighboring cities such as

Plano, Frisco, Irving, Richardson, and Fort Worth. The chilling effect of the Citys Stop Work

Order against the Project on EMFs Property will be significant, as developers will be deterred

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from working in and with a City where a major project can be abruptly stopped 1/3 of the way

into construction.

18. For all these reasons, the Citys Stop Work Order is, at best, premature and, in

substance and effect, an impermissible government taking of EMFs Property. Accordingly, the

Citys Stop Work Order should be immediately enjoined by this Court. Additionally, the Citys

Stop Work Order constitutes an unconstitutional taking of EMFs Property under the United

States Constitution and the Texas Constitution. Finally, the Stop Work Order violates

enforceable promises the City has made to EMF, and is thus separately actionable under the

theory of promissory estoppel.

IV. FACTUAL BACKGROUND

A. EMF Obtains All Necessary Permits Prior to Commencing Construction of the


Project.

19. EMF hereby incorporates by reference the paragraphs above as if fully set forth

herein.

20. EMF is in the process of constructing a five-story, 253-unit multifamily

development on its Property at 4217 Swiss Avenue. See Affidavit of Bradley C. Miller dated

October 30, 2017, a true and correct copy of which is attached hereto as Exhibit 1, at 5, 6.

Prior to beginning construction, starting as early as 2014, EMF navigated the permitting process

with the City, during which the Project was subjected to the regular, rigorous scrutiny of the

Citys permitting process. Ex. 1, Miller Affidavit at 5; see Affidavit of Don Jones dated

October 30, 2017, a true and correct copy of which is attached hereto as Exhibit 2, at 4. In

November of 2016, the City approved the Project and issued multiple permits to EMF in

connection with the Project. Ex. 1, Miller Affidavit at 6; Ex. 2, Jones Affidavit at 4. As

planned and allowed by the permits, EMF began work on the Project in reliance on the issuance

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of these permits and the Citys promised green light. Ex. 1, Miller Affidavit at 6; Ex. 2,

Jones Affidavit at 4. During the intervening time, EMF invested more than $13.9 million in

the Project. Ex. 1, Miller Affidavit at 6.

21. The HOA lodged challenges to the issuance of the permits with the City, but did

not seek to prevent commencement of construction. Ex. 1, Miller Affidavit at 7. The HOA

complained that the permits should not have been issued because they do not require the Project

to conform to a City of Dallas ordinance addressing residential proximity slopes (RPS) that

allegedly emanate from other distant, non-adjacent properties located in Dallas Planned

Development District 298 (PD 298). Ex. 1, Miller Affidavit at 7.

22. The Director of Sustainable Development and Construction for the City of Dallas

(the Director) correctly concluded that no RPS applied to the Project or the Property and, thus,

the permits issued to EMF do not require EMF to conform to RPS. Ex. 1, Miller Affidavit at 8.

The HOA appealed the decision to the Board of Adjustment for the City of Dallas. Ex. 1, Miller

Affidavit at 9. After hearing the HOAs appeal, with only a single dissenting vote, the Board

upheld the decision of the Director with respect to the inapplicability of RPS. Ex. 1, Miller

Affidavit at 9.

23. In March of 2017five months after construction began and following the

Boards decision upholding the issuance of the permitsthe HOA filed a lawsuit against the

City of Dallas and the Board seeking a writ of certiorari and judicial review of the Boards

decision under section 211.011 of the Texas Local Government Code in the District Court,

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Dallas County, Texas.2 The case was assigned to the 134th Judicial District Court, Hon. Dale

Tillery presiding (State Trial Court). EMF was not named as a party in the suit.

24. The HOA moved for summary judgment in the State Trial Court on July 20, 2017.

As a non-party to the case, EMF received no notice of the motion or a hearing on the motion.

Yet, the HOAs motion asked the State Trial Court to reverse the Citys decision which could

have had the effect of preventing EMFs work on the Project. The City responded and filed its

own motion for summary judgement on August 1, 2017. Because it was not a party at that time,

EMF was not given an opportunity to defend its substantial investment in the Project on its

Property.

25. Had EMF been included as a Party in the litigation initiated by the HOA, it could

and would have brought to the State Trial Courts attention evidence as to the design of its

Project and its impact in the community, as well as arguments in opposition to relief requested

by the HOA. Despite EMFs necessary role in the case and its noted absence, the HOA Court

held a hearing on the pending motions for summary judgment on August 30, 2017, and

continued that hearing to September 11, 2017. On September 11, the State Trial Court granted

final summary judgment for the HOA and against the City. Ex. 1-B. EMF had intervened in the

case on September 8, 2017, but summary judgment was already granted to the HOA and against

the City before EMF could be heard on the merits.

26. In response to the September 11, 2017 Final Judgment, and despite the fact that

EMF, the real party in interest, had not yet been heard from and that the court in the HOA Suit

continued to enjoy plenary power, the City of Dallas sua sponte responded to the Final Judgment

by issuing a September 14, 2017 Stop Work Order to halt all construction at 4217 Swiss
2
A true and correct copy of the Petition is attached hereto as Exhibit 3, and incorporated
herein by reference.

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Avenue. Ex. 1, Miller Affidavit at 8. A true and correct copy of the Stop Work Order is

attached hereto as Exhibit 1-C. The Stop Work Order required EMF to immediately halt all

work being done on the Project. See Ex. 1-C.

27. EMF responded by filing an Emergency Motion to Stay Enforcement of

September 11, 2017 Final Judgment in the State Trial Court on September 15, 2017 (Motion to

Stay). On September 18, 2017, the State Trial Court held a hearing on EMFs Motion to Stay,

in which the State Trial Court made clear on the record that its September 11 Final Judgment

contained neither an injunction against EMFs continued construction on the Property or the

Project nor any specific mandate to the City to issue the Stop Work Order. However, the State

Trial Court denied EMFs Emergency Motion to Stay Enforcement.3

28. EMF filed a Notice of Appeal in the State Trial Court appealing the State Trial

Courts September 11 Final Judgment to the Fifth District Court of Appeals at Dallas, Texas

(State Court of Appeals), leading to Cause No. 05-17-01112-CV in the State Court of Appeals.

29. EMF immediately filed a Motion to Determine Supersedeas Security Under Texas

Rule of Appellate Procedure 24.2(a)(3) with the State Trial Court on September 19, 2017.

EMFs Motion requested that the State Trial Court fulfill its ministerial duty to set the type and

amount of supersedeas security in order for EMF to post adequate security and suspend

enforcement of the State Trial Courts Final Judgment during the appellate process before

irreparable harm continued to mount against EMF. The State Trial Court held a hearing on this

Motion on September 22, 2017, and the State Trial Court subsequently issued an Order declining

3
A true and correct copy of the State Trial Courts September 18 Order denying the
Motion to Stay is attached hereto as Exhibit 4, and incorporated herein by reference.

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to set the amount and type of security necessary to suspend its Final Judgment under Rule

24.2(a)(3).4

30. EMF next filed an Emergency Motion for Review Under Texas Rule of Appellate

Procedure 24.4(A) of the State Trial Courts Order Refusing to Set Supersedeas Security in the

State Court of Appeals on September 25, 2017. This Motion requested that the State Court of

Appeals reverse the State Trial Courts abuse of discretion in refusing to set the amount and type

of security necessary for EMF to supersede the State Trial Courts September 11 Final Judgment

during the pendency of EMFs appeal so that EMF before irreparable harm continued to mount

even further against EMF. As of the date of this Complaint, EMFs Motion remains pending in

the State Court of Appeals.

31. As real party in interest Intervenor, it was EMFs right to maintain the status

quothat is, for work to continue on the Projectwhile it pursued post-judgment motions or

filed an appeal secured by a supersedeas bond within (at minimum) the 30-day period between

the Final Judgment and enforcement of the judgment. However, EMF was abruptly and wrongly

deprived of these rights when the City issued its premature and unnecessary Stop Work Order.

B. The Citys Premature Stop Work Order Places Hundreds of Jobs and EMFs
Enormous Investment in the Project at Grave Risk.

32. The Citys Stop Work Order poses a disastrous and immediate threat not only to

the Project, but also to EMFs overall business operations (including the operations of its parent

and sibling companies), its employees, employees families, and numerous other stakeholders.

Given its size and complexity, the Project requires sophisticated planning, advanced dedication

4
A true and correct copy of the State Trial Courts September 22 Order denying the
Motion to Determine Supersedeas Security is attached hereto as Exhibit 5, and incorporated
herein by reference.

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of resources, the involvement of a large workforce consisting of many men and women,

contingent financing, and massive risk of capital.

33. To secure financing for the Project, EMF obtained a loan insured under the United

States Department of Housing and Urban Development 221(d)(4) program (the HUD Loan).

By halting all construction on the Project as a result of the Final Judgment and Stop Work Order,

EMF is in violation of its Regulatory Agreement for Multifamily Projects issued by HUD

(Regulatory Agreement), a true and correct copy of which is attached hereto as Exhibit 1-D.

Ex. 1, Miller Affidavit at 14. The Regulatory Agreement expressly states that HUD may

declare a default (Declaration of Default) under this Agreement if a violation occurs and is not

corrected within 30 days of notice. Ex. 1-D 37(a). If HUD so declares a default, as it likely

will, HUD will notify the lender who is then permitted to declare the whole Indebtedness due

and payable and thereupon proceed with foreclosure of the Security Instrument. Id. 37(b)(ii).

HUD is even permitted under the Regulatory Agreement to unilaterally [t]ake possession of the

Mortgaged Property. Id. 37(b)(iv).

34. The ramifications of violating the Regulatory Agreement or its lender agreements,

and ultimately risking being declared in material default thereof, for all Encore entities and their

hundreds of employees, are catastrophic and irreparable. Besides the devastating impact a

default would have on the Project, HUD could potentially also issue a red flag on EMFs

parent entity, Encore, and all its subsidiaries. Ex. 1, Miller Affidavit at 15. Should HUD

decide to issue a red flag, it would immediately freeze the remittance of funds for all other

loans Encore entities have pending with HUD, which could then preclude Encore entities,

including EMF, from participating in both current and future HUD and Federal Housing

Administration (FHA) insured loans. Ex. 1, Miller Affidavit at 15.

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35. EMFs parent entity, Encore, currently has twelve (12) major loans pending with

HUD, all of which could be negatively impacted by the Stop Work Order. Ex. 1, Miller

Affidavit at 16. Encore has already drawn many millions of dollars and committed many

millions more in the form of down payments and land purchase expenditures on a number of

these loans. Ex. 1, Miller Affidavit at 16. This is in addition to the vast sums Encore has spent

on the due diligence required for each of the HUD loans. Ex. 1, Miller Affidavit at 16. The

Regulatory Agreement expressly requires that all relevant permits and licenses must be obtained

before the HUD Loan closes, and EMF expended considerable funds not only on properly

obtaining the issued permits, but also on hiring third-party consultants to confirm that the permits

have been obtained, and that the RPS did not apply to the Property. See Ex. 1-D 7.

36. Further, because of the Stop Work Order, HUD could preclude all Encore entities

from applying for new HUD and FHA loans for the indefinite future, thus depriving Encore of a

vital and irreplaceable funding source. Ex. 1, Miller Affidavit at 17. If all twelve HUD-related

projects are indeed halted as a result of the Stop Work Order, the consequences to Encore

including all of its employees, vendors, and partnerswill be ruinous and irreparable. Ex. 1,

Miller Affidavit at 17.

37. Therefore, absent the injunctive relief requested herein, the domino effect flowing

from abruptly halting the Project will have harsh and irreparable effects on the many working

men and women whose employment hinges on the Project. Indeed, approximately 610 workers

currently employed by EMFs contractor and sub-contractors will likely lose employment

because of the Stop Work Order. Ex. 1, Miller Affidavit at 18. These are hourly workers who

depend on the paychecks they earn from their hard labor to support themselves and their

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families. Ex. 1, Miller Affidavit at 18. These critical jobs and their wages will disappear if the

Stop Work Order remains in effect. Ex. 1, Miller Affidavit at 18; Ex. 2, Jones Affidavit at 5.

38. Additionally, absent the injunctive relief requested herein, the Project will not be

able to recover and easily resume construction at a later date. Ex. 1, Miller Affidavit at 19; Ex.

2, Jones Affidavit at 11. Once the team of workers employed by EMF is dispersed, it will be

extremely difficultif not impossibleto reassemble them (especially in the wake of

reconstruction efforts in South Texas arising from the devastation of Hurricane Harvey). Ex. 1,

Miller Affidavit at 19; Ex. 2, Jones Affidavit at 11. Indeed, it is entirely unclear how EMF

will replace all the many sub-contractors and workers whose hiring and organization had been

carefully coordinated and scheduled far in advance. Ex. 1, Miller Affidavit at 19; Ex. 2, Jones

Affidavit at 11. The workers will desperately go in search of other work to support their

families, as they should and must, and the meticulously assembled and scheduled labor force will

be irretrievably lost. Ex. 1, Miller Affidavit at 19; Ex. 2, Jones Affidavit at 11.

39. Further, the Stop Work Order will also have an irreparable impact on EMFs non-

party foreign investors and their ability to legally enter the United States. Ex. 1, Miller Affidavit

at 20. EMF has substantial investors in the Project who are not United States citizens, and who

have undergone, or are presently undergoing, the arduous process of obtaining visas through the

EB-5 program administered by the United States Citizenship and Immigration Services.5 Ex. 1,

Miller Affidavit at 20. Those non-party investorsand those investors familieswho have

already obtained visas contingent on the Project would almost certainly lose them because the

enterprise in which they invested is no longer viable. Ex. 1, Miller Affidavit at 20. Likewise,

5
The EB-5 Program was enacted in 1990 to stimulate the U.S. economy through job
creation and capital investment by foreign investors. See www.uscis.gov/eb-5, last visited
September 15, 2017.

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those investorsand those investors familieswho are in the process of obtaining EB-5 visas

would no longer be able to complete the application process. Ex. 1, Miller Affidavit at 20. In

addition, the work stoppage could create a disruption in Encores Dallas EB-5 Regional Center

and even have a rippling effect on Encores other Regional Centers across the United States. Ex.

1, Miller Affidavit at 20. The consequences for these innocent men and women would be

dismal. Ex. 1, Miller Affidavit at 20. For instance, besides losing their own immigration

status, Encore may not be able to accommodate foreign investors who would like to send their

children to United States colleges. Ex. 1, Miller Affidavit at 20. These potential repercussions

will likely cause great harm to EMF, Encore, and many other innocent, hardworking people if

the Stop Work Order were to continue in effect. Ex. 1, Miller Affidavit at 20.

40. Furthermore, absent the injunctive relief requested herein, significant and costly

work (which has already been completed or partially completed) on the Project will be

indefinitely suspended. Ex. 1, Miller Affidavit at 21; Ex. 2, Jones Affidavit at 7, 13. All of

the grading and underground utilities have been constructed or installed. Ex. 1, Miller Affidavit

at 21; Ex. 2, Jones Affidavit at 7. In addition, concrete grade beams have been completed,

which support the parking structure that is also well under construction. Ex. 1, Miller Affidavit

at 21; Ex. 2, Jones Affidavit at 7. A photograph of the progress of the parking structure is

attached hereto as Exhibit 1-E. The structures and fixtures that have been partially completed

will be exposed to the elements and to the potential theft of metal piping. Ex. 1, Miller Affidavit

at 21. Because the Stop Work Order came with no warning or preparation time, construction

ceased mid-job and the site was not prepared for the work cessation; even if work stops, the job

site should be wound down and secured. Ex. 1, Miller Affidavit at 21. The Stop Work Order

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does not allow for the orderly wind-down of work as it prohibits any activity on the Property.

Ex. 1-C (Stop Work Order); Ex. 1, Miller Affidavit at 21; Ex. 2, Jones Affidavit at 12.

41. Moreover, absent the injunctive relief requested herein, the construction loans

supporting the Project will needlessly impose substantial interest and other penalties on EMF.

Ex. 1, Miller Affidavit at 22. EMF has already drawn millions of interest-bearing dollars on

the HUD Loan, and EMF has also received millions of dollars in separate private funding

currently bearing extremely costly compounding interest. Ex. 1, Miller Affidavit at 22. Any

delay caused by the Stop Work Order will result in additional interest carry expense and

considerable penalties. Ex. 1, Miller Affidavit at 22. The Stop Work Order constitutes a very

severe compliance infraction with EMFs lenders that could ultimately result in the default of

EMFs loans and, as noted, preclude Encore from participating in future HUD or FHA insured

loans. Ex. 1, Miller Affidavit at 22. If the Final Judgment were ultimately reversed on motion

or on appeal, the individual homeowners represented by the HOA would almost certainly be

unable to satisfy payment of the colossal economic damages EMF has incurred and will continue

to incur so long as the Stop Work Order is in effect. Ex. 1, Miller Affidavit at 22.

42. In Encores approximately twenty years of existence, it has never lost an

investors investment. Ex. 1, Miller Affidavit at 23. This sterling track record, made possible

by the hard work of countless good men and women, will be in jeopardy if the Stop Work Order

stays in place. Ex. 1, Miller Affidavit at 23.

C. The Stop Work Was Not Required by the Final Judgment and Has Deprived EMF
of its Right to Maintain the Status Quo.

43. The disastrous consequences resulting from the Stop Work Order need not be

suffered by EMF or its hundreds of workers because the Final Judgment manifestly did not

order, require, compel, or even suggest that the Stop Work Order be issued. Indeed, were there

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any confusion as to this point, the confusion was obviated by Judge Tillery, himself. At a

hearing in the HOA Suit on EMFs Motion to Stay Enforcement of Judgment, Judge Tillery

clearly and unequivocally stated on the record:

My ruling didnt have a stop orderI didnt order the City to stop work. I
didnt order the construction company to stop work.6

Transcript 11:7-8; 15:25-16:1.7 As Judge Tillery observed, the HOA never sought a temporary

restraining order, a temporary injunction, a permanent injunction, or any other sort of injunctive

relief. The HOA agrees with Judge Tillerys conclusion that the State Court Judgment did not

compel issuance of the Stop Work Order by the City. In its Response to EMFs Motion to Stay,

the HOA stated that characterization of the Stop Work Order as enforcement of [the State]

Courts summary judgment order is incorrect and misunderstands the nature of the proceeding.8

In other words, both the State Court Judge and the HOA have agreed, on the record, that the

State Court Judgment did not compel the City of Dallas to issue the Stop Work Order.

44. The Citys decision to, sua sponte, issue the Stop Work Order was a separate act,

entirely the Citys own, and cannot be justified by suggesting that it was required by a courtas

made clear by the HOAs pleadings and the State Courts own words. Therefore, the issue now

before this Court is not to second guess another courts judgment, but rather the Citys

6
For purposes of clarification, EMF does not seek this Court to enjoin any actions of the
State Court Judge, the State Court Final Judgment, or interfere in the appellate process thereof.
Rather, EMF contends that the Citys Stop Work Order was issued independently of the State
Court Final Judgment and EMF now seeks to enjoin the deleterious effects of the Stop Work
Order or any actions in reliance thereon.
7
A true and correct copy of the transcript of the hearing on Intervenors Emergency
Motion to Stay Enforcement of Final Judgment is attached hereto as Exhibit 6, and incorporated
herein by reference.
8
A true and correct copy of the HOAs Response in Opposition to EMFs Emergency
Motion to Stay Enforcement of Final Judgment is attached hereto as Exhibit 7, and incorporated
herein by reference.

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independent and unilateral act of issuing the Stop Work Order against the Project on EMFs

Property, which has caused and will continue to cause immediate and irreparable injury to EMF.

Indeed, EMF has been deprived of its rights to maintain the status quo during the, at minimum,

30-day period following issuance of the Final Judgment. Additionally, the Stop Work Order

constitutes an unconstitutional taking of EMFs Property under the United States Constitution

and the Texas Constitution, and violates the enforceable promises the City has made to EMF and

is thus separately actionable under the theory of promissory estoppel.

V. CONDITIONS PRECEDENT

45. All conditions precedent to the claims for relief set forth herein have occurred,

been satisfied, or waived.

VI. CLAIMS FOR RELIEF

COUNT I
Inverse Condemnation and impermissible takings under the Fifth and Fourteenth
Amendments of the United States Constitution and Article I, Section 17 of the Texas
Constitution

46. EMF incorporates by reference the allegations of all preceding paragraphs as if

fully set forth herein.

47. After being subjected to the rigorous scrutiny of the Citys permitting process,

EMF successfully obtained all the necessary Permits to begin construction of the Project.

Thereafter, EMF expended massive resourcesin dedicated time, money, and manpower

expecting that the Project could be developed, in good faith reliance on the Citys representations

and permits sanctioning the Project. During this time, EMF invested more than $13.9 million in

the Project.

48. The calamitous Stop Work Order has deprived the Property of all economically

viable use and value, and has amounted to an unreasonable interference with EMFs use and

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enjoyment of its Property. As of now, no work of any kind can be done on the Property. The

Stop Work Order contains no conditions, limitations, or instructions other than communicating

that no work may be performed on the Property. Additionally, the Stop Work Order has

deprived the Property of all economic value because the total amount of money EMF has

invested in the Propertywhich is over $13.9 million as of nowexceeds the Propertys current

value under the Stop Work Order. That is, the value that has been taken from the Property

overwhelmingly outweighs the value remaining in the Property. The economic impact of the

Stop Work Order has thus been devastating. Additionally, the Stop Work Order has clearly and

substantially interfered with, if not totally destroyed, EMFs distinct investment-backed

expectations. EMF relied on the permitted use of the Property in making its massive investments

in the Project. EMF relied in good faith on the permits it obtained, as well as the decision of the

Director validating the permits, and the Boards upholding of the Directors decision, at

enormous expense. Further, the character of the governmental action is severely problematic as

the Stop Work Order was issued only against EMF and was not required by the court in the HOA

Suit.

49. EMF has a vested property interest in the Property through its ownership and

development thereof.

50. The Stop Work Order was an intentionally performed act by the government,

which proximately caused the inverse condemnation or regulatory taking.

51. For these reasons, the Citys Stop Work Order is an unconstitutional taking under

the Fifth and Fourteenth Amendments of the United States Constitution and under the Texas

Constitution, Article I, Section 17.

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52. EMF has suffered actual damages, as well as irreparable harm and injury, for

which there is no adequate remedy at law.

53. EMF further requests a declaration of its rights and any other legal relations of or

under the Stop Work Order pursuant to 28 U.S.C. 2201, et seq.

COUNT II
Promissory Estoppel

54. EMF incorporates by reference the allegations of all preceding paragraphs as if

fully set forth herein.

55. The City made promises to EMF, as contained in and expressed by the

construction permits it issued to EMF and the representations it made related thereto, which the

City did not keep. The City issued all the permits EMF requested in order to begin construction

of the Project, upheld the permits through the Directors decision, and then again endorsed the

permits by the Boards ruling upholding the Directors decision.

56. EMF has reasonably and substantially relied on the Citys permits,

representations, and promises, to its great detriment. After receiving the permits and

concomitant assurances from the City, EMF, in good faith reliance on the Citys representations

and permits sanctioning the Project, expended significant and substantial resources in dedicated

time, money, and manpower with the reasonable expectation that the Project could be developed

through its intended completion. After the Directors decision in favor of EMF and against the

HOA, and after the Board upheld the Directors decision, EMF continued to expend vast

resources on the Project in good faith reliance on the Citys decisions. During this time, EMF

invested more than $13.9 million in the Project

57. EMFs reliance on the Citys promises was reasonable and was or should have

been foreseeable to the City.

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58. The only means of correcting the injustice to EMF is by enforcing the Citys

promises to permit construction of the Project through completion and by nullifying the efficacy

of the Stop Work Order.

VII. DAMAGES

59. EMF incorporates by reference the allegations of all preceding paragraphs as if

fully set forth herein.

60. Each of the unlawful acts alleged herein has, in addition to irreparable harm,

proximately caused damages to EMF. EMF has suffered, and will continue to suffer in the

future, immeasurable direct and consequential actual damages, including without limitation:

default on its loans, loss of its workforce, interest expenses and penalties on its loans, damage to

its property, lost profits, damage to goodwill, and loss of the benefits associated with

development of the Property, and, in the alternative to the injunctive relief requested herein,

hereby requests judgment for the full amount of damages sustained.

VIII. ATTORNEYS FEES AND COSTS

61. EMF incorporates by reference the allegations of all preceding paragraphs as if

fully set forth herein.

62. EMF has retained experienced legal counsel to represent it in this action and has

agreed to pay reasonable and necessary attorneys fees and costs. EMF seeks recovery of their

reasonable and necessary attorneys fees pursuant to 28 U.S.C. 2201, et seq., and TEX. CIV.

PRAC. & REM. CODE 37.001, et seq. and 38.001, et seq.

IX. APPLICATION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY


INJUNCTION, AND PERMANENT INJUNCTION

63. EMF incorporates by reference the allegations of all preceding paragraphs as if

fully set forth herein.

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64. The requirements for showing entitlement to a temporary restraining order and

preliminary injunction under Federal Rule of Civil Procedure 65 are identical. See Clark v.

Prichard, 812 F.2d 991, 993 (5th Cir. 1987). To obtain a temporary restraining order and a

preliminary injunction, EMF must show:

a. There is a substantial likelihood that EMF will prevail on the merits;

b. There is a substantial threat that irreparable injury will result if the


injunction is not granted;

c. The threatened injury outweighs the threatened harm to the City; and,

d. Granting the preliminary injunction will not disserve the public interest.

Janvey v. Alguire, 647 F.3d 585, 595 (5th Cir. 2011); Canal Auth. of Florida v. Callaway,

489 F.2d 567, 572 (5th Cir. 1974); Elite Rodeo Assn v. Profl Rodeo Cowboys Assn, 159 F.

Supp. 3d 738, 743 (N.D. Tex. 2016).

65. EMF seeks a temporary restraining order and preliminary injunction pursuant to

Federal Rule of Civil Procedure 65. In particular, EMF requests the Court to preliminarily

enjoin the effectiveness of the Stop Work Order issued by the City of Dallas and attached hereto

as Exhibit 1-C and enjoin the City of Dallas and its agents, assigns, representatives, or any

person who is participating or is in active concert with it, who receives actual notice of the

Courts order granting injunctive relief by personal service, telecopy, e-mail, or otherwise from

taking any action as a result of, in furtherance of, or in reliance upon the Stop Work Order or

preventing or delaying EMF from developing or continuing construction upon the Project in any

respect.9

9
Once again, and for purposes of clarification, EMF does not ask this Court to enjoin any
actions of the State Court, the State Court Final Judgment, or interfere in the appellate process
thereof. Rather, EMF contends that the Citys Stop Work Order was issued by the City sua
sponte and independent of the State Court Final Judgment, and EMF now seeks to enjoin the
deleterious effects of the Citys unilateral Stop Work Order.

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66. EMFs request for injunctive relief seeks to preserve the status quo pending this

Courts final adjudication on EMFs claims; the status quo being that, prior to the Citys Stop

Work Order, EMF was engaged in construction of the Project on its Property. Therefore, the

injunctive relief requested by EMF is necessary to preserve the status quo pending a final

judgment or other disposition of this action and to restrain the City, vis-a-vis its agents, , assigns,

representatives, or any person who is participating or is in active concert with it, who receives

actual notice of the Courts order granting injunctive relief by personal service, telecopy, e-mail,

or otherwise from committing further impermissible takings or violations of EMFs rights in a

way that would tend to render a judgment in this action ineffectual or resulting in the lack of an

adequate remedy at law for EMF. EMF has invested millions of dollars in the Project, all of

which is currently at risk because of the Stop Work Order, and thus EMF believes this

substantial and committed investment precludes the need for an additional monetary bond.

Nevertheless, EMF is willing to post an appropriate bond for this relief.

67. As pleaded herein and demonstrated above, EMF has no adequate remedy at law,

and therefore also seeks a permanent injunction against the City as relief ordered from this Court.

The standard for obtaining a permanent injunction is to that of a preliminary injunction.

68. EMF has further satisfied the requirements for the issuance of injunctive relief

through the affidavits of Bradley C. Miller and Don Jones supplied in support of this Original

Complaint and Application for Temporary Restraining Order, Preliminary Injunction, and

Permanent Injunction.

A. There is a substantial likelihood that EMF will prevail.

69. The Fifth Amendment to the United States Constitution, which has been applied

to the states through the Fourteenth Amendment, provides: nor shall private property be

taken for public use, without just compensation. U.S. CONST. amend. V; see also Sheffield
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Dev. Co. v. City of Glen Heights, 140 S.W.3d 660, 669 (Tex. 2004) ([T]he Takings Clause of

the Fifth Amendment [has been] made applicable to the states through the Fourteenth

Amendment.). Article I, Section 17 of the Texas Constitution provides that [n]o persons

property shall be taken, damaged or destroyed for or applied to public use without adequate

compensation being made, unless by the consent of such person. TEX. CONST. art. I, 17.

70. A regulatory undertaking that is confiscatory in nature is a taking. See, e.g.,

Wheeler v. Pleasant Grove, 644 F.2d 99, 100 (5th Cir. 1981). In Wheeler, the Fifth Circuit held

that a citys confiscatory measure of revoking a previously-granted building permit for an

apartment complex constituted a taking. Id.; see also A.A. Profiles, Inc. v. Ft. Lauderdale,

850 F.2d 1483, 1488 (11th Cir. 1988). Just so here.

71. EMF has established a substantial likelihood of success on the merits in this

matter by showing: (1) the Citys independently, prematurely, and non-judicially issued Stop

Work Order has deprived EMF of its rights to file post-judgment motions and/or an appeal

secured by supersedeas bond to maintain that status quo in the ongoing HOA Suit; (2) the Stop

Work Order has deprived EMFs Property of all economically beneficial use or value, and has

amounted to an unreasonable interference with EMFs use and enjoyment of the Property, in

violation of the Fifth and Fourteenth Amendments of the United States Constitution and Article

I, Section 17 of the Texas Constitution; and, (3) promissory estoppel is appropriate because EMF

reasonably and detrimentally relied in good faith on the Citys numerous representations and

permits issued over the course of roughly three years, yet the City sua sponte issued its Stop

Work Order when not required by court order or law, thereby damaging EMF irreparably.

B. There is a substantial, imminent threat that irreparable injury will result.

72. To satisfy the irreparable harm prong of the preliminary injunction test, a

movant must show that irreparable injury is likely in the absence of an injunction. Elite Rodeo
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Assn, 159 F. Supp. 3d at 743 (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22

(2008)). In general, a harm is irreparable where there is no adequate remedy at law, such as

monetary damages. Elite Rodeo Assn, 159 F. Supp. 3d at 744 (citing Janvey, 647 F.3d at 600).

73. As demonstrated herein and above, the Citys wrongful acts have caused, and are

continuing to cause, irreparable harm and injury to EMF for which there is no adequate remedy

at law.

74. The Citys Stop Work Order poses just such an imminent and immediate threat

because it is currently preventing all work on the Project. Soon many workers will lose their

work and wages, which will force EMF to self-report the Stop Work Order to HUD and cause

additional violations under the terms of the parties Regulatory Agreement and risk HUD

declaring a material default thereof. All of these grave harms will befall EMF immediately if the

Stop Work Order remains in place.

75. As noted herein and above, EMF has dedicated vast resources to planning,

coordinating, and scheduling construction of the Project. No less than 610 workers planning and

depending on employment on the Project will lose their work. It is entirely unclear what these

workers and their families will do should they lose their work on the Project. Further, once this

meticulously coordinated workforce disperses in desperate search of other work, it will likely be

impossible for EMF to reassemble the many workers. They will, in all probability, be lost to

EMF for good. Another significant irreparable harm EMF will suffer is the fact that it will

default on its HUD Loan and, perhaps even worse, consequently Encore may default on its

twelve HUD loans and be prevented from even applying for HUD or FHA loans in the future.

The insurance HUD and FHA provide for commercial loans is indispensable for EMF. If the

Stop Work Order remains in place, the very viability of Encore and all its many related entities,

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including EMF, will immediately be jeopardized. Moreover, EMF has already engaged in

substantial construction of the Project on its Property. As of now, there are partially completed

structures that are injuriously exposed to the elements and to potential theft and vandalism. If

the Stop Work Order remains in force, EMFs structures could be irreversibly damaged.

Furthermore, EMF risks the loss of negotiated and agreed-upon pricing for labor and materials

provided by subcontractors and vendors, particularly in the wake of the reconstruction efforts in

South Texas rebuilding from the devastation caused by Hurricane Harvey.

76. These many injuries to EMF cannot be readily calculated in monetary damages or

measured by any pecuniary standards. EMF has no adequate remedy at law for the injury that

the Citys Stop Work Order has caused and threatens to further cause. There is simply no legal

remedy that would give EMF complete, final, and equal relief. The damage that the Stop Work

Order has caused and continues to cause to EMFs operations, workers, and even Encores future

viability is impossible to accurately measure in monetary terms.

C. The threatened injury to EMF outweighs any threatened harm to the City.

77. Issuing the injunctive relief requested herein will substantially outweigh any

injury sustained by the City. Indeed, the City has already approved of EMFs construction on the

Project and issued the permits necessary therefor. It is entirely unlikely that the City would have

issued these permits in the first place if the City risked injury of any kind. Accordingly, EMF

has no reason to believe that the City will be harmed by the issuance of injunctive relief to EMF.

In fact, permitting the continuation of construction through the issuance of the injunctive relief

requested herein will actually serve the public interest by permitting EMF to continue

construction while the parties rights are exhausted on appeal in the State Court proceedings.

78. Conversely, and as demonstrated herein above, substantial and irreparable injury

will be sustained by EMF in the absence of the injunctive relief requested herein.
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D. A temporary restraining order, preliminary injunction, and permanent


injunction will not disserve the public interest.

79. Granting the preliminary injunction will maintain the status quo until the rights

and duties of the parties can be finally adjudicated and will pose no direct harm to the public.

80. Therefore, pursuant to Federal Rule of Civil Procedure 65, EMF asks this Court to

enter a temporary restraining order immediately.

81. EMF has invested millions of dollars in the Project on its Property which is

currently at risk, and thus EMF believes this substantial and committed investment precludes the

need for an additional monetary bond. Nonetheless, EMF is willing to post a bond as security

for the issuance of a temporary restraining order and preliminary injunction should this Court so

request.

82. EMF requests that its Application for Temporary Restraining Order be granted as

follows and thereafter that its Application for Preliminary Injunction be set for hearing, and that

the City be notified of the date, time, and place of that hearing. Upon such hearing, EMF

requests the Court issue the preliminary injunctive relief requested herein and enjoin the

effectiveness of the Stop Work Order issued by the City of Dallas and attached hereto as Exhibit

1-C, and enjoin the City of Dallas and its agents, assigns, representatives, or any person who is

participating or is in active concert with it, who receives actual notice of the Courts order

granting injunctive relief by personal service, telecopy, e-mail, or otherwise from taking any

action as a result of, in furtherance of, or in reliance upon the Stop Work Order or preventing or

delaying EMF from developing or continuing construction upon the Project in any respect

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X. PRAYER FOR RELIEF

WHEREFORE, PREMISES CONSIDERED, EMF prays that Defendant City of Dallas

be commanded to appear and answer and that EMF have and recover the following from the City

of Dallas:

a. preliminary injunctive relief, restraining the City as requested in Section IX


above;

b. a permanent injunction on a final trial of this cause, restraining the City as


requested in Section IX above;

c. judgment for damages in a sum to compensate EMF for losses suffered as a result
of Defendants wrongful Stop Work Order and harm to EMF flowing from same;

d. EMFs reasonable attorneys fees incurred in this suit;

e. costs of suit;

f. prejudgment and post-judgment interest in the maximum amount allowed by law;

g. all other and further relief, in law or in equity, to which EMF may be entitled.

Respectfully submitted,

By: /s/ Alison R. Ashmore


Alison R. Ashmore
Texas State Bar No. 24059400
aashmore@dykema.com
Cliff P. Riley
Texas State Bar No. 24094915
criley@dykema.com
DYKEMA COX SMITH
1717 Main Street, Suite 4200
Dallas, Texas 75201
(214) 462-6400 Telephone
(214) 462-6401 Facsimile

ATTORNEYS FOR PLAINTIFF


EMF SWISS AVENUE, LLC

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CERTIFICATE OF SERVICE

I hereby certify that on October 30, 2017 a true and correct copy of the foregoing
document was served upon Defendant pursuant to the Federal Rules of Civil Procedure, as
follows:

Stacy Rodriguez
stacy.rodriguez@dallascityhall.com
Justin H. Roy
justin.roy@dallascityhall.com
Dallas City Attorneys Office
7DN Dallas City Hall
1500 Marilla Street
Dallas, TX 75200
Phone: 214-670-3519
Fax: 214-670-0622
Counsel for Defendant

/s/ Alison R. Ashmore


Alison R. Ashmore

RULE 65 CERTIFICATE

Pursuant to FED. R. CIV. P. 65(a)(1), I hereby certify that on October 30, 2017 Plaintiff
provided notice of its Application for Temporary Restraining Order to Defendant through
counsel, as follows:

Stacy Rodriguez
stacy.rodriguez@dallascityhall.com
Justin H. Roy
justin.roy@dallascityhall.com
Dallas City Attorneys Office
7DN Dallas City Hall
1500 Marilla Street
Dallas, TX 75200
Phone: 214-670-3519
Fax: 214-670-0622
Counsel for Defendant

/s/ Alison R. Ashmore


Alison R. Ashmore

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EXHIBIT 1
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 2 of 63 PageID 32

IN THE UNITED STATES DISTRICT COURT


FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

EMF SWISS AVENUE, LLC,



Plaintiff,

v. CIVIL ACTION NO.

CITY OF DALLAS,


Defendant.

AFFIDAVIT OF BRADLEY C. MILLER

STATE OF TEXAS

COUNTY OF DALLAS

Before me, the undersigned authority, on this day personally appeared Bradley C. Miller,

known to me to be the person whose name is subscribed to this Affidavit, who, being by me duly

sworn, on his oath deposed and said:

1. My name is Bradley C. Miller. I am over eighteen years of age and am fully

competent and authorized in all respects to execute this affidavit. I have personal knowledge of

the facts hereinafter stated, which are true and correct, and if called as a witness, would testify

competently thereto.

2. Since February 15, 2010, I have been the President of Encore Multi-Family, LLC

(Encore). Encore is the sole member of EMF Swiss Avenue GP, LLC, which is the general

partner of EMF Swiss Avenue, LP, the sole member of EMF. I have knowledge of EMFs

business operations generally and, specifically, I have knowledge of EMFs multifamily

construction project (the Project) located at the property EMF owns at 4217 Swiss Avenue,
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 3 of 63 PageID 33

Dallas, Dallas County, Texas, 75204 (the Property). An illustrative rendering of what the

planned Project will look like once complete is attached hereto as Exhibit 1-A.

3. I have also reviewed the documents relating to the subject matter in the above-

captioned lawsuit. My testimony regarding the authenticity of exhibits attached to this Affidavit,

and incorporated herein, is based upon my personal review and knowledge of these documents.

4. EMF is a Delaware limited liability company and maintains its principal place of

business in Dallas, Dallas County, Texas.

5. EMF is the owner and developer of the Property. EMF is in the process of

constructing the Project, a five-story, 253-unit multifamily development on the Property. Prior

to beginning construction, EMF navigated the permitting process with the City, during which the

Project was subjected to the regular, rigorous scrutiny of the Citys permitting process.

6. The City of Dallas issued multiple permits to EMF connected to the Project on or

about November 21, 2016. As planned and allowed by the Permits, EMF began work on the

Project in reliance on the issuance of these permits and the Citys green light. To date, EMF

has invested more than $13.9 million in the Project. With every day that passes during pendency

of appeal, EMF will continue to invest hundreds of thousands, if not millions, of dollars in the

Project.

7. Peaks Addition Home Owners Association (Petitioner or HOA) challenged

the issuance of the permits because the permits do not require EMF to conform to a City of

Dallas ordinance addressing residential proximity slopes (RPS) that allegedly emanate from

other distant, non-adjacent properties located in Dallas Planned Development District 298 (PD

298). The HOA did not seek to prevent commencement of construction.

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8. The Director of Sustainable Development and Construction for the City of Dallas

correctly concluded that no RPS applied to the Project or the Property and, thus, the permits

issued to EMF do not require EMF to conform to RPS.

9. Petitioner appealed the issuance of the permits to the Board of Adjustment for the

City of Dallas (the Board). After hearing Petitioners appeal, with only a single dissenting

vote, the Board upheld the decision of the Director of Sustainable Development and Construction

with respect to the inapplicability of RPS. Petitioner then filed the above-captioned lawsuit

against the City of Dallas and the Board seeking a writ of certiorari and judicial review of the

Boards decision under section 211.011 of the Texas Local Government Code.

10. On September 11, 2017, this Court issued its Final Judgment, which granted

Petitioners motion for summary judgment and contemporaneously denied the City of Dallas and

the Boards motion for summary judgment. A true and correct copy of this Courts Final

Judgment is attached hereto as Exhibit 1-B.

11. The City of Dallas issued a stop work order (Stop Work Order) on September

14, 2017. A true and correct copy of the Stop Work Order is attached hereto as Exhibit 1-C.

12. As part of my job as President of Encore and based on my depth of experience in

the construction industry, I am familiar with the effect that a stop work order has on a major

construction project like that of the Property and the impact it is having on this Project.

Anything requiring that construction be halted mid-Project, poses a disastrous threat not only to

the Project, but also to EMFs business, its employees, employees families, and numerous of

EMFs stakeholders. If the City or any other body permanently halts EMFs development of the

Project, all of the money and time it has expended will become lost investments, with zero

return.

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13. Given its magnitude, the Project requires complex planning, advanced dedication

of resources, careful scheduling, the involvement of a large workforce consisting of many men

and women, contingent financing, and massive risk of capital.

14. To secure financing for the Project, EMF obtained a loan insured under the United

States Department of Housing and Urban Development 221(d)(4) program (the HUD Loan).

By halting all construction on the Project as a result of any order, EMF is in violation of its

Regulatory Agreement for Multifamily Projects issued by HUD (Regulatory Agreement), a

true and correct copy of which is attached hereto as Exhibit 1-D. The Regulatory Agreement

expressly states that HUD may declare a default (Declaration of Default) under this Agreement

if a violation occurs and is not corrected within 30 days of notice. Ex. 1-D 37(a). If HUD so

declares a default, as it likely will, HUD will notify the lender who is then permitted to declare

the whole Indebtedness due and payable and thereupon proceed with foreclosure of the Security

Instrument. Id. 37(b)(ii). HUD is even permitted under the Regulatory Agreement to

unilaterally [t]ake possession of the Mortgaged Property. Id. 37(b)(iv).

15. As part of my job as President of Encore and based on my depth of experience in

the construction industry, I am familiar with regulations and loans issued by the United States

Department of Housing and Urban Development (HUD) and with HUDs practices in various

scenarios of potential default and the repercussions that can follow. The ramifications of

incurring a violation, and ultimately a default, for all Encore entities and their hundreds of

employees, are catastrophic. Besides the devastating impact a default would have on the Project,

HUD will also issue a red flag on Encore, which immediately freezes the remittance of funds

for all other loans Encore entities have pending with HUD, and precludes Encore entities from

4
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 6 of 63 PageID 36

participating in both current and future HUD and Federal Housing Administration (FHA)

insured loans.

16. Encore currently has twelve (12) major loans pending with HUD that may all be

jeopardized by the Stop Work Order. Encore has already drawn many millions of dollars and

committed many millions more in the form of down payments and land purchase expenditures on

a number of these loans. This is in addition to the vast sums Encore has spent on the due

diligence required for each of the HUD loans. The Regulatory Agreement expressly requires

that all relevant permits and licenses must be obtained before the HUD Loan closes, and EMF

expended considerable funds on not only properly obtaining the issued permits, but on hiring

third-party consultants to confirm that the permits have been obtained. See Ex. 1-D 7.

17. Further, Encore will not be able to apply for new HUD and FHA loans for the

indefinite future, thus depriving Encore of a vital and irreplaceable funding source. If all twelve

HUD-related projects are indeed halted, the consequences to Encoreincluding all of its

employees, vendors, and partnerswill be ruinous. In this scenario, bankruptcy for Encore-

related entities will be almost certain, and the production and delivery of much-needed housing

will collapse.

18. The domino effect flowing from abruptly halting the Project will have harsh and

irreparable effects on the many working men and women whose employment hinges on the

Project. It is my estimate that approximately 610 workers, employed by EMFs contractor and

sub-contractors, will lose employment. These are hourly workers who depend on the paychecks

they earn from their hard labor to support themselves and their families. These critical jobs and

their wages will disappear if the Stop Work Order remains in effect or the Final Judgment is

enforced mid-Project and prior to exhausting all appeals.

5
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 7 of 63 PageID 37

19. Additionally, the Project will not be able to recover and easily resume

construction at a later date. Once the team of workers employed by EMF is dispersed, it will be

extremely difficultif not impossibleto reassemble them. It is entirely unclear how EMF will

replace all the many sub-contractors and workers whose hiring and organization had been

carefully coordinated far in advance. The workers will desperately go in search of other work to

support their families, as they should and must, and the meticulously assembled labor force will

be irretrievably lost.

20. Further, halting construction due to the Final Judgment interpretation or

enforcement also has a devastating impact on EMFs foreign investors and their ability to legally

enter the United States. EMF has substantial investors in the Project who are not United States

citizens, and who have undergone, or are presently undergoing, the arduous process of obtaining

visas through the EB-5 program administered by the United States Citizenship and Immigration

Services.1 Those investorsand those investors familieswho have already obtained visas

contingent on the Project would almost certainly lose them because the enterprise in which they

invested is no longer viable. Likewise, those investorsand those investors familieswho are

in the process of obtaining EB-5 visas would no longer be able to complete the application

process. In addition, the work stoppage could create a disruption in Encores Dallas EB-5

Regional Center and even have a rippling effect on Encores other Regional Centers across the

United States. The consequences for these men and women would be dismal. For instance,

besides losing their own immigration status, Encore may not be able to accommodate foreign

investors who would like to send their children to United States colleges. These potential

1
The EB-5 Program was enacted in 1990 to stimulate the U.S. economy through job creation and capital
investment by foreign investors. See www.uscis.gov/eb-5, last visited September 15, 2017.

6
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 8 of 63 PageID 38

repercussions could cause great harm to Encore and many other innocent, hardworking people if

the Stop Work Order were to stay in effect.

21. Another of the countless repercussions to the work stoppage is the fact that

significant, costly work has already been completed or partially completed on the Project. All of

the grading and underground utilities have been constructed or installed. In addition, concrete

grade beams have been completed, which support the parking structure that is also well under

construction. A photograph of the progress of the parking structure is attached hereto as Exhibit

1-E. The structures and fixtures that have been partially completed will be exposed to the

elements and to the potential theft of metal piping. Because the Stop Work Order came with no

preparation time, construction ceased mid-job and the site was not prepared for the work

cessation; even if work stops, the job site should be wound down and secured. The Stop Work

Order does not allow for the orderly wind-down of work as it prohibits any activity on the

Property.

22. Moreover, the construction loans supporting the Project will impose substantial

interest and penalties on EMF. EMF has already drawn millions of interest-bearing dollars on

the HUD Loan, and EMF has also received millions of dollars in separate private funding

currently bearing extremely costly compounding interest. Any delay caused by the Stop Work

Order will result in additional interest carry expense and considerable penalties. The Stop Work

Order constitutes a very severe compliance infraction with EMFs lenders that could ultimately

result in the default of EMFs loans and, as noted, preclude Encore from participating in future

HUD or FHA insured loans. If the judgment in this case is reversed on motion or on appeal,

EMF would have needlessly suffered colossal economic damages which EMF has already begun

7
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 9 of 63 PageID 39

to incur and will continue to incur so long as the Stop Work Order is in effect or the Final

Judgment is not superseded on appeal.

23. As part of my job as President of Encore, I have reviewed historical analyses of

the company. In Encores approximately twenty years of existence, we have never lost an

investors investment. This sterling track record, made possible by the hard work of countless

good men and women, will be in jeopardy if the Stop Work Order stays in place or the Final

Judgment is not superseded on appeal.

24. I believe that the City of Dallas would withdraw the Stop Work Order if the Final

Judgment entered by this Court were superseded.

25. I am not aware of any harm that will come to Petitioner by maintaining the status

quo and allowing the Project to continue while the Parties pursue their available legal remedies

and so that EMF can be heard by the Court. The Project is not complete and will still take many

months to complete.

26. In summary, grave harm will be suffered by EMF, Encore related entities, and

numerous innocent individuals if work is forced to cease on the Project pending appeal without

the Final Judgment being superseded. Besides the millions of dollars that will be needlessly lost,

the damage done to the persons and families rightfully depending on the employment provided

by the Project would be tragic and, worse, fully avoidable.

8
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 10 of 63 PageID 40

Further, Affiant sayeth not.

Bradley C. Miller

SUBSCRIBED AND SWORN TO before me, the undersigned authority, on this the 30
day of October, 2017, to certify which witness my hand and seal of office.
A
A

UVa)(X)
Notary Public in and r the State of Maine

Genie Ingraham
Notary Public State Of Maine
My Commission Expires Apri 24, 2020

9
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 11 of 63 PageID 41

EXHIBIT 1-A
1

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Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 13 of 63 PageID 43

EXHIBIT 1-B
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 14 of 63 PageID 44

CAUSE NO. DC-17-02532

PEAK'S ADDITION IN THE DISTRICT COURT


HOME OWNER'S ASSOCIATION,
Plaintiff,

v. 134TH JUDICIAL DISTRICT

CITY OF DALLAS and BOARD OF


ADJUSTMENT FOR THE CITY OF
DALLAS,
Defendants. DALLAS COUNTY, TEXAS

FINAL JUDGMENT

Before the Court is Plaintiffs Motion for Summary Judgment and Defendants'

Motion for Summary Judgment. Having considered the Motions, the respective

responses and replies, the arguments of counsel, the pleadings and briefs, and the

summary judgment evidence, the CottrtcantircterThYt a residential proximity717

e rem entia properties in su area 9 of PD 29 aI1


f "

IT IS, THEREFORE, Ordered, Adjudged, and Decreed that Plaintiffs

Motion for Summary Judgment is Granted and the decision of the Dallas Board of

Adjustment upholding the interpretation of the building official is Reversed.

IT IS FURTHER Ordered that Defendants' Motion for Summary Judgment is

Denied.

This judgment disposes of all parties and issues and is a final, appealable

judgment.

Signed this /7 day of 5 1W72 017.

ONORABLE i E TILL
PRESIDING JUDGE

FINAL JUDGMENT
1544292.1
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 15 of 63 PageID 45

EXHIBIT 1-C
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 16 of 63 PageID 46

STOP WORK ORDER


WORK PERFORMED ON THESE PREMISES IS IN VIOLATION
OF CHAPTER 52 OF THE DALLAS CITY CODE

ANY PERSON OR PERSONS PERFORMING CONSTRUCTION


RELATED ACTIVITIES WHILE THIS NOTICE IS IN EFFECT
COMMITS AN OFFENSE PUNISHABLE BY A FINE NOT TO
EXCEED $2000 EACH DAY

ADDRESS:
City of Dallas

FOR MORE INFORMATION


IN CALL BUILDING INSPECTION:
PHONE: 9I/g 4160 am- I
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 17 of 63 PageID 47

EXHIBIT 1-D
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 18 of 63 PageID 48

DOCUMENT CERTIFICATION

Certified to be a true and correct copy of the original


of the following document:

REGULATORY AGREEMENT
FOR MULTIFAMILY PROJECTS

Recorded on November 28, 2016

under Clerk's File No.o/(000,3033' I

Official Public Records of Dallas County, Texas.

Date: November 29, 2016

CHICAGO TITLE OF TEXAS, LLC

By:
Roxanne Linscomb
Senior Commercial Escrow Officer
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 19 of 63 PageID 491

201600330337
ip 911litiilp11 1 OMB Approval No.2502-0598
14 AGREE 1/44 (Exp. 06/30/2017)

Public Reporting Burden for this collection of information is estimated to average .75 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing
the collection of information. Response to this request for information is required in order to receive the benefits to be derived. This
agency may not collect this information, and you are not required to complete this form unless it displays a currently valid OMB
control number. While no assurance of confidentiality is pledged to respondents,. HUD generally discloses this data only in
response to a Freedom of Information Act request.

Recording Requested by:


David A. Barsky, Esq.
Krooth & Altman LLP
1850 M Street NW, Suite 400
Washington, DC 20036

After Recording return to:


Office of Counsel
U.S. Department of Housing
and Urban Development
Fort Worth Regional Office
801 Cherry St., Unit #45, Suite 2500
Fort Worth, TX 76102

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT


REGULATORY AGREEMENT FOR MULTIFAMILY PROJECTS

UNDER SECTIONS 207, 220, 221(d)(3), 221(d)(4), 223(a)(7), 223(f) and 231 OF THE
NATIONAL HOUSING ACT, AS AMENDED

Replaces HUD- 92465, 92466, FHA-1730, and 1733

Project Name: Encore Swiss Avenue Apartments

HUD Project No.: 113-35640


HAP Contract No.: N/A

Project Location: Dallas, Dallas County, Texas

Lender: Berkadia Commercial Mortgage LLC Processed under: [X]MAP [ ]TAP

Original Principal Amount of Multifamily Note: $34,856,200.00


Originally endorsed for insurance under Section 221(d)(4)

Date of Note: as of November 1, 2016

Residual Receipts Rider: Yes X No


*If "yes" is checked, the Surplus Cash provisions of this Agreement are modified by an attached Rider
relating to residual receipts account requirements.

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 20 of 63 PageID 502

This Agreement is entered into as of the 1st day of November, 2016, between
EMF SWISS AVENUE, LLC, a limited liability company organized and existing under
the laws of Delaware, whose address is 5005 LBJ Freeway, Suite 1200, Dallas, Texas
75244, its successors, heirs, and assigns (jointly and severally) (Borrower) and the
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,
acting by and through the Secretary, his or her successors, assigns or designates
(HUD).

In consideration of, and in exchange for an action by HUD, HUD and Borrower agree
to the terms of this Agreement. The HUD action may be one of the following: HUD's
endorsement for insurance of the Note, HUD's consent to the transfer of the Mortgaged
Property, HUD's sale and conveyance of the Mortgaged Property, or HUD's consent to
other actions related to Borrower or to the Mortgaged Property.

Further, Borrower and HUD execute this Agreement in order to comply with the
requirements of the National Housing Act, as amended, and the regulations adopted by
HUD pursuant thereto. This Agreement shall continue during such period of time as
HUD shall be the owner, holder, or insurer of the Note. Upon satisfaction of such Note,
this Agreement shall automatically terminate. However, Borrower shall be responsible
for any Violations of this Agreement which occurred prior to termination.

Violation of this Agreement may subject Borrower and other signatories hereto to
adverse actions. Refer to Article VII below.

AGREEMENTS: Borrower and HUD covenant and agree as follows:

I. DEFINITIONS

1. DEFINITIONS. Any capitalized term or word used herein but not defined shall have
the meaning given to such term in the Security Instrument between Borrower and
Lender or the Note. The following terms, when used in this Agreement (including when
used in the above recitals), shall have the -Following meanings, whether capitalized or
not and whether singular or plural, unless, in the context, an incongruity results:

a. "Affiliate" is defined in 24 C.F.R. 200.215, or any successor regulation.

b. "Borrower" means all entities identified as "Borrower" in the first paragraph of


the Security Instrument, together with any successors, heirs, and assigns (jointly
and severally). "Borrower" shall include any entity taking title to the Mortgaged
Property whether or not such entity assumes the Note. Whenever the term
"Borrower" is used herein, the same shall be deemed to include the obligor of the
debt secured by the Security Instrument and shall also be deemed to be the
mortgagor as defined by Program Obligations.

c. "Business Day" is defined in Section 46.

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces_form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 21 of 63 PageID 51

3
d. "Construction Contract" means the construction contract, approved by HUD,
between Borrower and the contractor contracting to perform construction or
substantial rehabilitation on the Project.

e. "Declaration of Default" is defined in Section 37.

f. "Displaced Persons or Families" means a person, family or families, displaced


from (i) an urban renewal area, (ii) as a result of government action, or (iii) as a
result of a major disaster determined by the President pursuant to the Robert T.
Stafford Disaster Relief and Emergency Assistance Act.

g. "Distribution" means any disbursal, conveyance or transfer of any portion of the


Mortgaged Property, including the segregation of cash or assets for subsequent
withdrawal as Surplus Cash, other than in payment of Reasonable Operating
Expenses, or any other disbursement, conveyance, or transfer provided for in
this Agreement.

h. "Elderly Person" means any person, married or single, who is 62 years of age
or older.

i. "Fixtures" means all property or goods that become so related or attached to


the Land or the Improvements that an interest arises in them under real property
law, whether acquired now or in the future, excluding all tenant owned goods and
property, and including but not limited to: machinery, equipment, engines,
boilers, incinerators, installed building materials; systems and equipment for the
purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or
light; antennas, cable, wiring and conduits used in connection with radio,
television, computers, security, fire prevention, or fire detection or otherwise used
to carry electronic signals; telephone systems and equipment; elevators and
related machinery and equipment; fire detection, prevention and extinguishing
systems and apparatus; security and access control systems and apparatus;
plumbing systems; water heaters, ranges, stoves, microwave ovens,
refrigerators, dishwashers, garbage disposals, washers, dryers and other
appliances; light fixtures, awnings, storm windows and storm doors; pictures,
screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling,
rugs and floor and wall coverings; fences, trees and plants; swimming pools;
playground and exercise equipment and classroom furnishings and equipment.

j. "Goods and Services" is defined in Section 22.

k. "HUD" means the United States Department of Housing and Urban


Development acting by and through the Secretary in his capacity as insurer or
Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)
Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 22 of 63 PageID 52

4
holder of the Loan under the authority of the National Housing Act, as
amended, the Department of Housing and Urban Development Act, as amended,
or any other federal law or regulation pertaining to the Loan or the Mortgaged
Property.

I. "Impositions" and "Imposition Deposits" are defined in the Security


Instrument.

m. "Improvements" means the buildings, structures, and alterations now


constructed or at any time in the future constructed or placed upon the Land,
including any future replacements and additions.

n. "Indebtedness" means the principal, interest on, and all other amounts due at
any time under the Note or the Security Instrument, including prepayment
premiums, late charges, default interest, and advances to protect the security as
provided in the Security Instrument.

o. "Land" means the estate in realty described in Exhibit A.

P. "Leases" means all present and future leases, subleases, licenses, concessions
or grants or other possessory interests now or hereafter in force, whether oral or
written, covering or affecting the Mortgaged Property, or any portion of the
Mortgaged Property (including but not limited to proprietary leases, non-
residential leases or occupancy agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals. (Ground leases that
create a leasehold interest in the Land and where the Borrower's leasehold is
security for the Loan are not included in this definition.)

q. "Lender" means the entity identified as "Lender" in the first paragraph of the
Security Instrument, or any subsequent holder of the Note, and whenever the
term "Lender" is used herein, the same shall be deemed to include the Obligee,
or the Trustee(s) and the Beneficiary of the Security Instrument and shall also be
deemed to be the Mortgagee as defined by Program Obligations.

r. "Loan" means the loan initially made by Lender to Borrower, as defined in the
Security Instrument.

s. "Mortgaged Property" means all of Borrower's present and future right, title and
interest in and to all of the following whether now held or later acquired:

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 23 of 63 PageID 53

(1) the Land;

(2) the Improvements;

(3) the Fixtures;

(4) the Personalty;

(5) all current and future rights, including air rights, development rights,
zoning rights and other similar rights or interests, easements, tenements,
rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights,
waters, watercourses, and appurtenances related to or benefiting the Land
or the Improvements, or both, and all rights-of-way, streets, alleys and
roads that may have been or may in the future be vacated;

(6) all insurance policies covering the Mortgaged Property, and all proceeds
paid or to be paid by any insurer of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property,
whether or not Borrower obtained such insurance policies pursuant to
Lender's requirement;

(7) all awards, payments and other compensation made or to be made by any
Governmental Authority with respect to the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property,
including any awards or settlements resulting from condemnation
proceedings or the total or partial taking of the Land, the Improvements,
the Fixtures, the Personalty or any other part of the Mortgaged Property
under the power of eminent domain or otherwise and including any
conveyance in lieu thereof;

(8) all contracts, options and other agreements for the sale of the Land, the
Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future,
including cash or securities deposited to secure performance by parties of
their obligations;

(9) all proceeds (cash or non-cash), liquidated claims or other consideration


from the conversion, voluntary or involuntary, of any of the Mortgaged
Property and the right to collect such proceeds, liquidated claims or other
consideration;

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 24 of 63 PageID 54

6
(10) all Rents and Leases;

(11) all earnings, royalties, instruments, accounts, accounts receivable,


supporting obligations, issues and profits from the Land, the
Improvements or any other part of the Mortgaged Property, and all
undisbursed proceeds of the Loan and, if Borrower is a cooperative
housing corporation, maintenance charges or assessments payable by
shareholders or residents;

(12) all Imposition Deposits;

(13) all refunds or rebates of Impositions by any Governmental Authority or


insurance company (other than refunds applicable to periods before the
real property tax year in which the Security Instrument is dated);

(14) all forfeited tenant security deposits under any Lease;

(15) all names under or by which any of the above Mortgaged Property may be
operated or known, and all trademarks, trade names, and goodwill relating
to any of the Mortgaged Property;

(16) all deposits and/or escrows held by or on behalf of Lender under Collateral
Agreements; and

(17) all awards, payments, settlements or other compensation resulting from


litigation involving the Project.

Notwithstanding items numbered (1) through (17) above, Borrower may hold non-
project funds in separate, segregated accounts, specifically labeled as non-project
funds, which are not part of the Mortgaged Property. These accounts may hold those
assets owned or received by Borrower, through equity contributions, gifts, or loan
proceeds that were not required by HUD to become part of the Mortgaged Property and
were not made a part of the Mortgaged Property by Borrower and funds released from
the Mortgaged Property in compliance with Program Obligations (such as Distributions
of Surplus Cash, if allowed).

t. "Note" means the Note executed by Borrower described in the Security


Instrument, including all schedules, riders, allonges and addenda, as such Note may
be amended from time to time.

u. "Notice" is defined in Section 46.

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 25 of 63 PageID 55

7
v. "Personalty" means all equipment, inventory, and general intangibles. The
definition of "Personalty" includes furniture, furnishings, machinery, building
materials, appliances, goods, supplies, tools, books, records (whether in written or
electronic form), computer equipment (hardware and software) and other tangible or
electronically stored personal property (other than Fixtures) that are owned, leased
or used by Borrower now or in the future in connection with the ownership,
management or operation of the Land or the Improvements or are located on the
Land or in the Improvements, and any operating agreements relating to the Land or
the Improvements, and any surveys, plans and specifications and contracts for
architectural, engineering and construction services relating to the Land or the
Improvements, choses in action and all other intangible property and rights relating
to the operation of, or used in connection with, the Land or the Improvements,
including all certifications, approvals and governmental permits relating to any
activities on the Land. Intangibles shall also include all cash and cash escrow funds
related to the Project, such as but not limited to: Reserve for Replacement
accounts, bank accounts, Residual Receipt accounts, and investments.

w. "Principal" is defined in 24 C.F.R. 200.215, or any successor regulation.

x. "Project" and "Project Assets" mean the Mortgaged Property.

y. "Program Obligations" means (1) all applicable statutes and any regulations
issued by the Secretary pursuant thereto that apply to the Project, including all
amendments to such statutes and regulations, as they become effective, except that
changes subject to notice and comment rulemaking shall become effective only
upon completion of the rulemaking process, and (2) all current requirements in HUD
handbooks and guides, notices, and mortgagee letters that apply to the Project, and
all future updates, changes and amendments thereto, as they become effective,
except that changes subject to notice and comment rulemaking shall become
effective only upon completion of the rulemaking process, and provided that such
future updates, changes and amendments shall be applicable to the Project only to
the extent that they interpret, clarify and implement terms in this Agreement rather
than add or delete provisions from such document. Handbooks, guides, notices,
and mortgagee letters are available on HUD's official website:
(http://www.hud.gov/offices/adm/hudclips/index.cfm or a successor location to that
site)

z. "Property Jurisdiction" is (are) the jurisdiction(s) in which the Land is located.

aa. "Reasonable Operating Expenses" means the reasonable expenses and


payments that arise from the purchase of goods or services which are exclusively
used for the operation, maintenance, and routine repair of the Project (including all
Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)
Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 26 of 63 PageID 56

8
payments and deposits required under this Agreement, the Note, or the Security
Instrument), or as otherwise permitted by Program Obligations.

bb. "Rents" means all rents (whether from residential or non-residential space),
revenues, issues, profits (including carrying charges, maintenance fees, and other
cooperative revenues, and fees received from leasing space on the Mortgaged
Property), other income of the Land or the Improvements, gross receipts,
receivables, parking fees, laundry and vending machine income and fees and
charges for food and other services provided at the Mortgaged Property, whether
now due, past due, or to become due, Residual Receipts, and escrow accounts,
however and whenever funded and wherever held.

cc. "Reserve for Replacement" is defined in Section 10.

dd. "Security Instrument" means the Multifamily (Mortgage, Deed of Trust, or


other designation as appropriate by Property Jurisdiction), Assignment of Leases
and Rents and Security Agreement (HUD-94000M), and any other security for the
Indebtedness between Borrower and Lender, and shall be deemed to be the
"mortgage" as defined by Program Obligations.

ee. "Surplus Cash" means certain Project cash pursuant to the calculation set
forth in Section 13.

ff. "State" includes the several states comprising the United States of America, and
Puerto Rico, the District of Columbia, Guam, the Commonwealth of the Northern
Marianas, American Samoa, and the U.S. Virgin Islands.

gg. "Taxes" means all taxes, assessments, vault rentals and other charges, if any,
general, special or otherwise, including all assessments for schools, public
betterments and general or local improvements, that are levied, assessed or
imposed by any public authority or quasi-public authority, and that, if not paid, could
become a lien on the Land or the Improvements.

hh. "Undocumented Expense" is defined in Section 16.

ii. "Violation" is defined in Section 36.

jj. "Waste" means a failure to keep the Mortgaged Property in decent, safe and
sanitary condition and in good repair. During any period in which HUD insures the
Loan or holds a security interest on the Mortgaged Property, Waste is committed
when, without Lender's and HUD's express written consent, Borrower:

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(1) physically changes the Mortgaged Property, whether negligently
or intentionally, in a manner that reduces its value;

(2) fails to maintain and repair the Mortgaged Property in accordance


with Program Obligations;

(3) fails to pay before delinquency any Taxes secured by a lien having
priority over the Security Instrument;

(4) materially fails to comply with covenants in the Note, the Security
Instrument or this Regulatory Agreement respecting physical care,
maintenance, construction, abandonment, demolition, or insurance
against casualty of the Mortgaged Property; or

(5) retains possession of Rents to which Lender or its assigns have the
right of possession under the terms of the Loan Documents;

IL CONSTRUCTION; REFINANCING

2. [Check the applicable box(es)1


121 a. CONSTRUCTION FUNDS. Borrower shall keep funds of the Mortgaged Property
to be used for construction or substantial rehabilitation separate and apart from
operating funds of the Mortgaged Property. Funds for construction or substantial
rehabilitation are identified in the Building Loan Agreement and/or Construction
Contract.

I I b. NON-CRITICAL, DEFERRED REPAIR FUNDS. Borrower shall keep funds of the


Mortgaged Property to be used for non-critical repairs separate and apart from
operating funds of the Mortgaged Property. Funds for non-critical repairs are identified
in the Escrow Agreement for Non-Critical, Deferred Repairs, if applicable.

3. UNPAID OR OUTSTANDING OBLIGATIONS. Borrower certifies, upon final or


initial/final endorsement of the Note by HUD, Borrower shall have no unpaid obligations
in connection with the purchase of the Mortgaged Property, the construction or repair of
the Mortgaged Property, or with respect to the Security Instrument, except such unpaid
obligations as have the written approval of HUD as to terms, form and amount; and,
except for those obligations approved by HUD in writing, the Land shall be paid for in
full and is free from any liens or purchase money obligations, or if the Land is subject to
a leasehold interest, it must be subject to a HUD approved lease, and it shall be free
from any lien. As of the date hereof, Borrower has no knowledge of any liens or
encumbrances against the Mortgaged Property that are not reflected as exceptions to
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coverage in the lender's title policy insuring the Security Instrument accepted by HUD
or that are not shown on the UCC search. All contractual obligations of Borrower or on
behalf of Borrower with any party shall be fully disclosed to HUD.

4. LENDER'S CERTIFICATE. Borrower acknowledges receipt of the Lender's


Certificate or the Request for Endorsement of Credit Instrument & Certificate of Lender,
Borrower & General Contractor, as applicable. To the extent such document
establishes or reflects obligations of Borrower, such provisions are incorporated herein
by this reference. Borrower agrees that the fees and expenses enumerated in the
applicable document have been fully paid or payment has been provided for as set forth
in such document and that all funds deposited with Lender shall be used for the
purposes set forth in such document insofar as Borrower has rights and obligations in
respect thereto.

5. CONSTRUCTION COMMENCEMENT/REPAIRS.

I a. [Check the box to the left for Construction/Substantial Rehabilitation transactions.]


Borrower certifies that it has not commenced construction or substantial rehabilitation of
the Mortgaged Property prior to HUD's initial endorsement of the Note, except that this
Section 5a is not applicable if HUD has given prior written approval to an early start of
construction, or if this Project is an Insurance Upon Completion or if such work has
been disclosed to and approved in writing by HUD. If Borrower has received prior
written approval for early start, Borrower shall perform, observe and comply with all
Program Obligations for early start prior to initial endorsement, which includes but is not
limited to the release of liens in association with the Project, the funding of escrows for
change orders, and the payment of an inspection fee.

b. [Check the box to the left for Refinance/Purchase transactions.] Borrower shall
complete any non-critical repairs in accordance with the terms of the Firm Commitment.
Borrower is in receipt of HUD's written acknowledgment of the satisfactory completion
of any non-critical repairs for the Mortgaged Property to the extent such non-critical
repairs have been completed. Borrower has provided funds to complete any remaining
repairs, as evidenced by the Escrow Agreement for Non-critical, Deferred Repairs, in
accordance with Program Obligations, if applicable.

6. DRAWINGS AND SPECIFICATIONS. The Mortgaged Property shall be


constructed in accordance with the terms of the Construction Contract as approved by
HUD, if any, and with the Drawings and Specifications that have been approved by
HUD and deemed attached to the Construction Contract.

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7. REQUIRED PERMITS

0 a. [Check the box to the left for Construction/Substantial Rehabilitation


transactions.] The Borrower has obtained, or caused to be obtained, all necessary
certificates, permits, licenses, qualifications, authorizations, consents and approvals
from all necessary Governmental Authorities to own and operate the Project and to
carry out all of the transactions required by the Loan Documents and to comply with all
applicable federal statutes and regulations of HUD in effect on the date of the Firm
Commitment, except for those, if any, which customarily would be obtained at a later
date, at an appropriate stage .of construction or completion thereof, and which the
Borrower shall obtain, or cause to be obtained, in the future. As the construction of the
Project progresses, the Borrower will obtain or cause to be obtained, and submit to
HUD and Lender all necessary building and other permits required by Governmental
Authorities. The Mortgaged Property shall not be available for occupancy by any tenant
without the prior written approval of HUD and of all other legal authorities having
jurisdiction of the Mortgaged Property.

I I b. [Check the box to the left for Refinancing/Acquisition transactions.] Borrower has
obtained, or cause to be obtained, all necessary certificates, permits, licenses,
qualifications, authorizations, consents and approvals from all necessary Governmental
Authorities to own and operate the Project, to carry out all of the transactions required
by the Loan Documents and to comply with all applicable federal statutes and
regulations of HUD in effect on the date of the Firm Commitment. If HUD requires that
Borrower execute an Escrow Agreement for Non-Critical, Deferred Repairs in
connection with HUD's endorsement for insurance of the Note, the licenses and permits
that are in effect as of the date hereof are sufficient to allow any repair of the
improvements required pursuant to the terms of the Escrow Agreement for Non-Critical,
Deferred Repairs to proceed to completion in the ordinary course.

8. ACCOUNTING REQUIREMENTS.

0 a. [Check the box to the left for Construction/Substantial Rehabilitation


transactions.] Borrower shall submit a cost certification to HUD, if and as required by
Program Obligations, for all receipts and disbursements during the period set forth
therein. The excess of project income over property disbursements, as determined by
HUD, shall be treated as a recovery of construction cost, except as otherwise allowed in
Program Obligations.

b. [Check the box to the left for Refinancing/Acquisition transactions.] Borrower


shall submit a cost certification to HUD, if and as required by Program Obligations,
including all receipts and disbursements relating to repairs required pursuant to the
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Building Loan Agreement and/or the Escrow Agreement for Non-Critical, Deferred
Repairs. Any funds remaining after completion of the repairs shall be treated in
accordance with Program Obligations, and pursuant to the Escrow Agreement for Non-
Critical Deferred Repairs, if applicable.

III. FINANCIAL MANAGEMENT

9. PAYMENTS. Borrower shall make promptly all payments due under the Note,
Security Instrument, and this Agreement.

10.RESERVE FOR REPLACEMENT. Borrower shall establish and maintain a Reserve


for Replacement account for defraying certain costs of replacing major structural
elements and mechanical equipment of the Project or for any other purpose.

a. The Reserve for Replacement shall be deposited with Lender or in a safe and
responsible depository designated by Lender in accordance with Program Obligations.
Such funds shall at all times remain under the control of Lender or Lender's designee
and shall be held in accounts insured or guaranteed by a federal agency and in
accordance with Program Obligations.

b. Borrower shall deposit a monthly amount of $6,957.50, concurrently with the


beginning of payments towards amortization of the Note unless a different date or
amount is established by HUD. At least every ten years, starting from the date of initial
or initial/final endorsement of the Note, and more frequently at HUD's sole discretion,
Borrower shall submit to HUD a written analysis of its use of the Reserve for
Replacement during the prior ten years and the projected use of the Reserve for
Replacement in accordance with Program Obligations. The amount of the monthly
deposit may be increased or decreased from time to time at the written direction of HUD
without a recorded amendment to this Agreement.

c. Borrower shall carry the balance in this account on the financial records as a
restricted asset. The Reserve for Replacement shall be invested in accordance with
Program Obligations, and any interest earned on the investment shall be deposited in
the Reserve for Replacement for use by the Project in accordance with this Section 10.

d. Disbursements from the Reserve for Replacement shall only be made after consent,
in writing, of HUD, in its sole discretion, or as otherwise approved by HUD pursuant to
Program Obligations. In the event of a Declaration of Default under the terms of the
Security Instrument, pursuant to which the Indebtedness has been accelerated, a
written notification by HUD to Borrower of a violation of this Agreement or at such other
times as determined solely by HUD, HUD may direct the application of the balance in
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such account to the amount due on the Indebtedness as accelerated or for such
other purposes as may be determined solely by HUD. '

e. In the case of a transfer of the Mortgaged Property where the Project is already
subject to a Security Instrument insured or held by HUD as of the date hereof, and this
Agreement is now being executed by Borrower as of the date hereof, the Reserve for
Replacement now to be established shall be equal to the amount due to be in such
account under this Agreement, and payments hereunder shall begin with the first
payment due on the Security Instrument after acquisition, unless some other method of
establishing and maintaining the account is approved in writing by HUD.

f. Upon Borrower's full satisfaction of all HUD obligations, including but not limited to
those imposed under this Agreement, Borrower shall receive any monies remaining in
the Reserve for Replacement.

11. PROPERTY AND OPERATION; ENCUMBRANCES.

a. Borrower shall deposit all Rents and other receipts of the Project in connection with
the financing of the Project, including equity or capital contributions required under the
Firm Commitment or otherwise advanced for the purpose and as part of the Mortgaged
Property, in the name of the Project in a federally insured depository or depositories and
in accordance with Program Obligations. (Such required equity or capital contributions
shall .not include certain syndication proceeds, such .as proceeds from Low Income
Housing Tax Credit transactions used to repay bridge loans, all as more fully set forth in
Program Obligations.) Such funds shall be withdrawn only in accordance with the
provisions of this Agreement for Reasonable Operating Expenses of the Project or for
Distribution of Surplus Cash or as reimbursement of advances as permitted by Sections
14 and 15 below; or for permitted deposits authorized by this Agreement or for any
other reason authorized under this Agreement. Any person or entity receiving
Mortgaged Property other than for payment of Reasonable Operating Expenses,
authorized Distributions of Surplus Cash, or for any reason authorized under Section 34
of this Agreement, shall immediately deliver such Mortgaged Property to the Project and
failing so to do shall hold such Mortgaged Property in trust.

b. Borrower shall not engage in any business or activity, including the operation of any
other project, or incur any liability or obligation not in connection with the Project, nor
acquire an Affiliate or contract to enter into any affiliation with any party except as
otherwise approved by HUD.

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c. Borrower shall satisfy or obtain a release of any mechanic's lien, attachment,
judgment lien, or any other lien that attaches to the Mortgaged Property or any part
thereof.

d. Penalties, including but not limited to delinquent tax penalties and civil money
penalties, shall not be paid from the Project.

e. Borrower shall promptly notify HUD of the appointment of any receiver for the
Project, the filing of a petition in bankruptcy or insolvency or for reorganization.

f. Borrower shall keep the Mortgaged Property insured at all times in accordance with
the Security Instrument and Program' Obligations, and Borrower shall notify HUD of all
payments received from an insurer.

g. Borrower shall notify HUD of any action or proceeding relating to any condemnation
or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged
Property, whether direct or indirect condemnation.

h. Borrower shall notify HUD of any litigation proceeding filed against Borrower or the
Project, or any litigation proceeding filed by Borrower.

12.SECURITY DEPOSITS. Any funds collected as security deposits shall be kept (a)
separate and apart from all other funds of the Project; (b) in interest bearing trust
accounts, to the.extent required by State or local law; and (c) in an amount which shall
at all times equal or exceed the aggregate of all outstanding obligations under said
account. Security deposit account interest shall be paid on a pro rata basis to tenants
or applied to sums due under their leases upon the termination of their tenancy in the
Project. The use of tenant security deposits for Project operations is prohibited unless
the tenant has forfeited the deposit.

13. Surplus Cash.

a. Borrower must calculate Surplus Cash as of the last day of its fiscal year.
Borrower may also, at its election, and if permitted pursuant to Program
Obligations, calculate Surplus Cash as of the last day of the sixth month of
its fiscal year. Borrower shall submit a report of its Surplus Cash
calculations to HUD with its required annual financial reports, pursuant to
Program Obligations.

b. Surplus Cash shall equal the sum of:

(I) Project cash and cash equivalents (excluding the Reserve for

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Replacement account and other HUD-required reserves);
(ii) short-term investments;
(iii) project-based Section 8 Housing Assistance Payments earned but
not yet received by Borrower; and
(iv) any amounts approved for withdrawal but not yet withdrawn from
the Reserve for Replacements or any other reserves or escrow
accounts;

after deducting:

(v) all sums due or required to be paid within the calendar month
following the date as of which Surplus Cash is calculated under the
terms of the Note and Security Instrument (including without
limitation principal, interest, mortgage insurance premium deposits,
deposits to the Reserve for Replacements and other reserves as
may be required by HUD, and tax and insurance escrow deposits);
(vi) all special funds required to be segregated by this Agreement, the
Note, the Security Instrument, or Program Obligations, including
tenant security deposits and any other amounts held in trust for
tenants; and
(vii) all other obligations of the Project payable within the next thirty
days, unless the obligation is paid subject to available Surplus
Cash or subject funds for payment of the obligation are set aside or
HUD has approved deferment of payment.

14. DISTRIBUTIONS. Borrower shall not make or take, or receive and retain, nor
allow any Affiliate or Principal to receive or retain any Distribution of assets or any
income of any kind of the Project, except from Surplus Cash or in accordance with
Program Obligations. Distributions are governed by the following conditions:

a. No Distribution shall be made or taken from borrowed funds. Distributions shall


not be taken prior to the completion of the Project. Distributions shall not be
taken after HUD has given Notice to Borrower of a Violation under this
Agreement or an Event of Default occurs under the Note or Security Instrument.
Distributions shall not be taken when a Project is under a forbearance
agreement.

b. No Distribution shall be made or taken when either (i) necessary services


(utilities, trash removal, security, lawn service or any other services that Borrower
is required to provide) are not being provided on a regular basis, which failure
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Borrower should have known about in the exercise of due care; (ii) notices of
physical repairs or deficiencies (including, but not limited to, building code
violations) by Governmental Authorities and/or by HUD have been issued and
remain unresolved to the satisfaction of the issuing public body; or (iii) Borrower
has been notified by HUD, Lender or a Governmental Authority that physical
repairs and/or deficiencies exist and Borrower has not corrected or cured the
identified items to HUD's satisfaction. Upon completion of the repairs, HUD may
permit a Distribution to be placed in an escrow account until a subsequent
inspection has been completed by HUD. If the Project passes a subsequent
inspection, HUD may then authorize release of the funds in the escrow account
to Borrower. HUD may also permit Distributions when there are minor or
contested local code violations on a case-by-case basis.

c. Any Distribution of any funds of the Project not permitted by this Agreement or
Program Obligations shall be returned to the appropriate Project account as
specified by HUD immediately.

d. Any Distributions shall be made or taken only as permitted by the law of the
applicable jurisdiction. Distributions, if taken, must be taken out of the
appropriate Project account as specified by HUD within the accounting period
immediately following the computation of Surplus Cash, and prior to the
Borrower's next calculation of Surplus Cash, pursuant to Section 13 above, and if
not taken within the identified period, these funds remain as Mortgaged Property
and may only be used as permitted by this Agreement.

e. Equity or capital contributions shall not be reimbursed from Project accounts


without the prior written approval of HUD. Borrower advances for Reasonable
Operating Expenses shall not be deemed to fall under this subsection but rather
shall be treated under Section 15 below.

15. BORROWER ADVANCES.

a. "Borrower Advances" means any advance of funds or loan to the Project made
by Borrower or any Affiliate for whatever reason. Borrower Advances do not
include equity or capital contributions whether required in conjunction with the
financing of the Project or otherwise. Borrower Advances may only be repaid
from Project funds pursuant to this Section 15.

b. Any Borrower Advances must be deposited into the Project's operating account
as required by Program Obligations. Interest may accrue on Borrower Advances
pursuant to Program Obligations and may only be paid in accordance with this
Section 15.

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c. Borrower Advances may only be repaid, and interest on Borrower Advances may
only be paid:

with prior written approval from HUD, or


if and to the extent that Borrower is permitted to take
Distributions, from funds allowable for Distributions, and only
at times when Distributions are permitted pursuant to Sections
13 and 14 of this Agreement.

d. Repayments of Borrower Advances, and payments of interest on Borrower


Advances, approved by HUD and made pursuant to Section 15(c)(i) shall be
considered Reasonable Operating Expenses.

e. Borrower shall require, as a condition of any agreement to repay Borrower


Advances, or to pay interest thereon, with any party making such Borrower
Advances, that such agreement shall recognize the limitations of this Section 15
and, if all of the conditions of this Section 15 are not met, shall hold the Borrower
and the Mortgaged Property harmless for failure to pay.

16.FINANCIAL ACCOUNTING. Borrower shall keep the books and accounts of the
operation of the Mortgaged Property in accordance with Program Obligations. The
books and accounts must be complete, accurate and current at all times. Posting
must be made at least monthly to the ledger accounts, and year-end adjusting
entries must be posted promptly in accordance with sound accounting principles.
Any Undocumented Expense or Distribution shall be an ineligible Project expense,
unless otherwise determined in writing by HUD. An "Undocumented Expense" is
an expense without sufficient documentation that provides reasonable identification
of the basis of the expense. Books, accounts and records shall be open and
available for inspection by HUD, after reasonable prior notice, during normal office
hours, at the Project or another mutually agreeable location.

17.BOOKS MAINTAINED BY MANAGEMENT AGENTS. The books and records of the


Project maintained by management agents and Affiliates shall be maintained in
accordance with Program Obligations and shall be open and available to inspection
by HUD, after reasonable prior notice, during normal office hours, at the Project or
another mutually agreeable location. Every agreement executed on behalf of the
Project with any management agent or Affiliate shall include the provision that the
books and records of the Project shall be properly maintained and open to
inspection during normal business hours by HUD at the Project or another mutually
agreeable location and that upon the termination of an agreement with management

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agent and/or Affiliates, the books and records of the Project maintained by the
management agent and/or Affiliates shall remain with Borrower.

18. ANNUAL FINANCIAL REPORTS.

a. Within ninety (90) days, or such period established in writing by HUD, following
the end of each fiscal year, Borrower shall prepare a financial report for the
Borrower's fiscal year, or the portion thereof that started with the Borrower's
assumption of financial responsibility (or the portion thereof that ended with
Borrower's permitted transfer pursuant to a HUD-approved transfer of the
Project), based on an examination of the books and records of the Borrower in
accordance with generally accepted accounting principles (GAAP) and in such
other form and substance as specified by HUD in supplemental guidance, and
provide such report to HUD in such form and substance as specified by HUD
under the Uniform Financial Reporting Standards at 24 C.F.R. 5.801 (UFRS), or
any successor regulations, and Program Obligations.

b. Unless specifically waived or modified by HUD or through Government notice


(OMB Circular A-133 or any equally applicable notice), Borrower shall: (i)
engage an independent, licensed Certified Public Accountant (CPA) to audit the
Borrower's annual financial report and to produce an audit report in accordance
with both Generally Accepted Government Auditing Standards (GAGAS) and
Generally Accepted Auditing Standards (GAAS); (ii) engage an independent,
licensed CPA to perform an agreed-upon procedure, in accordance with the
American Institute of Certified Public Accountants (AICPA) Statement on
Standards for Attestation Engagements (SSAE) Number 4, to compare the
financial data template information submitted electronically by the Borrower to
HUD against the annual financial report examined by, and the audit report
prepared by, the independent, licensed CPA; and (iii) furnish to HUD the audit
report, and any other reports relating to the annual financial report or the audit
report as required by Program Obligations, by such means and in such form and
substance as specified by HUD under UFRS, or any successor regulations, and
Program Obligations.

c. To the extent certain non-profit Borrowers' requirement to submit audited annual


financial reports may be waived or modified pursuant to OMB Circular A-133 or
any successor notice, no provisions of such notice shall be construed to relieve
Borrower of any requirements of this Section 18, except for those requirements
specifically waived or modified by such notice.

d. If Borrower fails to perform as required pursuant to this Section 18, HUD may, at
its sole election, and in a manner determined by HUD, and without affecting any
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other provisions of this Agreement, and without first providing notice of
violation of this Agreement pursuant to Section 36 of this Agreement, initiate a
forensic audit of the Borrower's books, records, and accounts in such a manner
as to provide to HUD with as much of the same information that would have been
provided had the Borrower not failed to perform as required. Any such audit
initiated by HUD does not relieve Borrower of the requirement to submit to HUD
an annual audited financial report as required pursuant to this Agreement.

IV. PROJECT MANAGEMENT

19.PRESERVATION, MANAGEMENT AND MAINTENANCE OF THE MORTGAGED


PROPERTY. Borrower (a) shall not commit Waste, (b) shall not abandon the
Mortgaged Property, (c) shall restore or. repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its original
condition, or such other condition as HUD may approve in writing, whether or not
litigation or insurance proceeds or condemnation awards are available to cover any
costs of such restoration or repair, and (d) shall keep the Mortgaged Property in decent,
safe, sanitary condition and good repair, including the replacement of Personalty and
Fixtures with items of equal or better function and quality, all in accordance with
Program Obligations. By executing' this Agreement, Borrower agrees and understands
that obligations (a) through (d) of this Section 19 are absolute and unconditional and are
not limited by any conditions precedent and are not contingent on HUD's performance of
any administrative or contractual obligations. Furthermore, HUD is in no way obligated to
provide funding or any financial assistance of any kind to Borrower to repair, rehabilitate,
maintain, or make improvements to the Mortgaged Property. The Mortgaged Property
must also be maintained in reasonable condition for proper audit and subject to
examination by HUD at the Project or another mutually agreeable location. In the event all
or any of the Improvements shall be destroyed or damaged by fire, by failure of warranty,
or other casualty, the money derived from any settlement, judgment, or insurance on the
Mortgaged Property shall be applied in accordance with the terms of the Security
Instrument. In the event all or any of the Improvements shall be taken by an exercise of
the power of eminent domain, all awards of compensation in connection with
condemnation for public use of or a taking of any of the Improvements shall be paid in
accordance with the Security Instrument.

20.FLOOD HAZARDS. Borrower shall maintain flood insurance if required by the


Security Instrument.

21.MANAGEMENT. Borrower shall provide management of the Mortgaged Property in


a manner deemed to be acceptable to HUD. At HUD's sole discretion, HUD may
require replacement of the management under any circumstances set forth in clause d.
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of this Section 21 pursuant to Program Obligations, in which case Borrower shall
immediately make arrangements for providing management satisfactory to HUD.
Borrower shall execute a management agreement or other document outlining
procedures for managing or operating the Mortgaged Property. Such agreement or
document must comply with Program Obligations. Borrower and management agent (if
applicable) shall submit and maintain a current management certification in accordance
with Program Obligations. In addition to the requirements of Section 17 above, all
management agreements must contain the following provisions:

a. HUD's rights and requirements prevail in the event of any conflict with the terms
of the management agreement.

b. The management agreement shall not be assigned without the prior written
approval of HUD.

c. Management fees will be computed and paid in accordance with HUD


requirements.

d. HUD may require Borrower to terminate the management agreement:

(1) immediately without penalty if an Event of Default occurs under the Security
Instrument, Note, or Regulatory Agreement;
(2) upon thirty (30) days written notice to Borrower and management agent, for
failure to comply with the provisions of the Management Certification, or for
other good cause; or
(3) immediately without penalty when HUD takes control of the Mortgaged
Property pursuant to its rights under the loan documents as mortgagee in
possession.

e. If Borrower terminates the management agreement pursuant to a request from


HUD, the management agent must immediately turn over to Borrower all of the
cash, accounts, deposits, investments, and records pertaining to the Mortgaged
Property.

f. Borrower may terminate the management agreement for cause with no more
than a thirty (30) day notice period.

g. The management agreement shall not exempt the management agent from
liability for damages, injuries or losses, resulting from the management agent's
gross negligence or willful misconduct.

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22.CONTRACTS FOR GOODS AND SERVICES. Consistent with Program


Obligations, Borrower shall obtain contracts for goods, materials, supplies, and services
(Goods and Services) at costs, amounts, and terms that do not exceed reasonable
and necessary levels and those customarily paid in the vicinity of the Land for Goods
and. Services received. The purchase price of Goods and Services shall be based on
quality, durability and scope of work and shall be made upon the most advantageous
terms for the Project operation. Reasonable Operating Expenses do not include
amounts paid for Improvements and/or betterments, unless approved in writing by HUD.
Borrower shall keep copies of all written contracts or other instruments that affect the
Mortgaged Property, all or any of which may be subject to inspection and examination
by HUD at the Project or another mutually agreeable location.

23.RESPONSIVENESS TO INQUIRIES. At the request of HUD, Borrower shall


promptly furnish operating budgets and occupancy, accounting and other reports
(including credit reports) and give specific answers to questions relative to income,
assets, liabilities, contracts, operation, and conditions of the Mortgaged Property and
the status of the Security Instrument.

24:TENANT ORGANIZATIONS. If the Project is subject to 24 C.F.R. 245 Subpart B or


any successor regulation covering the rights of tenants to organize, Borrower shall
comply with this Section 24. Borrower shall not (a) impede the reasonable efforts of
resident tenant organizations to represent their members or the reasonable efforts of
tenants to organize, or (b) unreasonably withhold the use of any community room or
other available space appropriate for meetings that is part of the Mortgaged Property
when requested by: (i) a resident tenant organization in connection with the
representational purposes of the organization; or (ii) tenants seeking to organize or to
consider collectively any matter pertaining to their living environment, which includes the
terms and conditions of their tenancy as well as activities related to housing and
community development. Borrower may charge for the use of the Mortgaged Property
any fees or costs approved by HUD as may normally be imposed for the use of such
facilities or may waive any such fees or costs.

V. ADMISSIONS AND OCCUPANCY

25. RESIDENTIAL UNITS AND SERVICES. If the Project is subject to regulation of rent
by HUD, Borrower shall make residential units and services of the Project available to
eligible tenants at charges not exceeding those established in accordance with a rental
schedule approved in writing by HUD.

26. LEASE TERMS FOR RESIDENTIAL UNITS. Residential units shall not be rented for
a period of less than thirty (30) days or for more than 3 years and shall not be used for
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transient or hotel purposes. Rental for transient or hotel purposes shall mean: (a)
rental for a period of less than thirty (30) days or (b) any rental, if the occupants of the
residential units are provided customary hotel services such as room service for food
and beverages, maid service, furnishings or laundering of linens, and bellhop service.
Residential units in projects with Security Instruments initially endorsed for insurance
pursuant to Section 231 of the National Housing Act, as amended, may be rented for a
period of more than 3 years.

27. COMMERCIAL (NON-RESIDENTIAL) LEASES. No portion of the Mortgaged


Property shall be leased for any commercial purpose or use without receiving HUD's
prior written approval as to terms, form and amount, except that for lease renewals or
extensions or amendments involving no change in terms or use, rent increases are
permitted without HUD approval. Borrower must deliver an executed copy of the
commercial Lease to HUD.

28.SUBLEASES. All Leases of residential units by Borrower to tenants must also


prohibit assignment of the leasehold interest by the tenant without the prior written
approval of Borrower. All Leases of residential units by Borrower to tenants must
prohibit tenants from entering into any subleases that do not run for at least thirty (30)
days and must require that all subleases be approved in advance in writing by
Borrower. Leases of residential units must prohibit the tenant from granting the right to
occupy the premises for a period of less than thirty (30) days or from furnishing hotel
services, as defined in Section 26. Assignment and subleasing of units by other than
the tenant thereof without the prior written approval of Borrower shall be prohibited in
the Lease. Upon discovery of any unapproved assignment, sublease or occupancy,
Borrower shall, to the extent permitted by law, immediately demand cancellation and/or
vacation of the premises, as appropriate, and notify HUD thereof.

29. TENANT SELECTION/OCCUPANCY.

a. If the Security Instrument is originally a HUD-held purchase money mortgage, or


is originally endorsed for insurance under any Section of the National Housing
Act, as amended, other than Section 231 units specially designed for use and
occupancy of Elderly Persons exclusively, Borrower shall not, in selecting
tenants, discriminate against any person or persons by reason of the fact that
there are children in the family, unless in accordance with the Fair Housing Act
and otherwise approved in writing by HUD.

b. If the Security Instrument is originally endorsed for insurance under Section 221,
Borrower shall, in selecting tenants, give to Displaced Persons or Families an
absolute preference or priority of occupancy that shall be accomplished as
follows: (1) For a period of sixty (60) days from the date of original offering,
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unless a shorter period of time is approved in writing by HUD, all units shall be
held for such preferred applicants, after which time any remaining unrented units
may be rented to non-preferred applicants; (2) thereafter, and on a continuing
basis, such preferred applicants shall be given preference over non-preferred
applicants in their placement on a waiting list to be maintained by Borrower; and
(3) through such further provisions agreed to in writing by the parties to this
Agreement.

c. At least 75% of the units in a Project insured under Section 231 shall be
designed for the use and occupancy of Elderly Persons unless prior written
approval is given by HUD for a lesser number of units.

d. All advertising or efforts to rent a project insured under Section 231 shall reflect a
bona fide effort of Borrower to obtain occupancy by Elderly Persons.

30. ADDITIONAL OCCUPANCY RESTRICTIONS AND POLICIES: None.

31.RENTS. If the Project is subject to regulation of rent by HUD, HUD will at any time
entertain a written request for a rent increase that is properly supported by
substantiating evidence and HUD will, within a reasonable time: (a) approve a rental
schedule that is necessary to compensate for any net increase, occurring since the last
approved rental schedule, in taxes (other than income taxes) and operating and
maintenance costs over which Borrower has no effective control; or (b) deny the
increase and state the reasons for its decision.

32. CHARGES FOR SERVICES AND FACILITIES. If the Project is subject to


regulation of rent by HUD, Borrower shall only charge to and receive from any tenant
such amounts as have the prior written approval of HUD and are mutually agreed upon
between Borrower and the tenant for any facilities and/or services not included in the
HUD approved rent schedule that may be furnished by, or on behalf of, Borrower to
such tenant upon request.

33. PROHIBITION OF CERTAIN FEES. Borrower shall not charge any Project tenant
or prospective Project tenant any fees prohibited under Program Obligations; such
prohibited fees may include an admission fee, a key fee, or similar payment pursuant to
any agreement to furnish residential units or services to persons making such
payments.

34.SECURITY DEPOSITS AND OTHER FEES. Borrower shall not require as a


condition of occupancy or leasing of any unit in the Project, any consideration or deposit
other than the prepayment of the first month's rent plus a security deposit in an amount
not in excess of one month's rent to guarantee the performance of the lease terms.
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Borrower may charge certain application processing fees such as credit check or
criminal background fees or pet deposits.

VI. ACTIONS REQUIRING THE PRIOR WRITTEN APPROVAL OF HUD

35. ACTIONS REQUIRING THE PRIOR WRITTEN APPROVAL OF HUD. Borrower


shall not without the prior written approval of HUD:

a. Convey, assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of


the Mortgaged Property or any interest therein, or permit the conveyance,
assignment, or transfer of any interest in Borrower (if the effect of such conveyance,
assignment or transfer is the creation or elimination of a Principal) unless permitted
by Program Obligations. Borrower need not obtain the prior written approval of
HUD: (i) for a conveyance of the Mortgaged Property at a judicial or non-judicial
foreclosure sale under the Security Instrument; (ii) for inclusion of the Mortgaged
Property in a bankruptcy estate by operation of law under the United States
Bankruptcy Code; (iii) for acquisition of an interest by inheritance or by Court decree;
or (iv) for actions permitted under subsection (g) below.

b. Enter into any contract, agreement or arrangement to borrow funds or finance any
purchase or incur any liability, direct or contingent other than for Reasonable
Operating Expenses.

c. Pay out any funds of the Mortgaged Property except as provided in this Agreement
and Program Obligations.

d. Except from permissible withdrawals of Surplus Cash, pay any compensation,


including wages or salaries, or incur any obligation to do so, to any officer, director,
stockholder, trustee, beneficiary, partner, member, manager (in the case of a
Borrower formed as a Limited Liability Company or Limited Liability Corporation), or
Principal of Borrower, or to any nominee thereof.

e. Enter into or change any contract, agreement or arrangement for supervisory or


managerial services or Leases for operation of the Project in whole or in part except
as permitted under Program Obligations.

f. Convey, assign or transfer any right to receive the Rents of the Mortgaged Property,
except as provided in the Security Instrument.

g. Remodel, add to, subtract from, construct, reconstruct or demolish any part of the
Mortgaged Property, except as required by HUD under Section 19(c) and except
that Borrower may, without the prior written approval of HUD, dispose of obsolete or
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deteriorated Fixtures or Personalty if the same are replaced with like items of the
same or greater quality or value and make minor alterations that do not impair the
security.

h. Permit the use of the Mortgaged Property for any other purpose except the use for
which it was originally intended, or permit commercial use greater than that originally
approved by HUD.

i. Amend the organizational documents of Borrower in a way that materially modifies


the terms of the organization, including, but not limited to: any amendment that
activates the requirement that a HUD previous participation certification be obtained
from any additional partner or member; any amendment that would authorize any
officer, partner or member other than the officer(s), general partner(s) or the
managing member(s) of the corporation, partnership or company or pre-approved
successor officer(s), general partner(s) or managing member(s) to bind the
corporation, partnership or company for any matters concerning the Project which
requires HUD's consent or approval; a change in the officer(s), general partner(s) or
managing member(s) or pre-approved successor officer(s), general partner(s) or
managing member(s) of the corporation, partnership or company and any proposed
changes to the HUD-required provisions included in the organizational documents.
Copies of all fully executed amendments to the organizational documents must be
provided to HUD within ten (10) days of the effective date of the amendment. If the
amendments to the organizational documents are recorded or filed, copies of the
recorded or filed documents must be provided to HUD within ten (10) days of receipt
by Borrower.

Reimburse any party from Mortgaged Property for payment of expenses or costs of the
Project or for any purpose except for Reasonable Operating Expenses and in a
manner consistent with Section 15.

k. Receive any fee or payment of any kind from any managing agent, employee of the
Project or of the managing agent, or other provider of Goods or Services of the Project,
except for warranty claims from providers of Goods and Services.

I. Initiate or acquiesce in a change in the zoning classification of the Mortgaged Property


that results in any change in permitted use that was in effect at the time of initial/final
endorsement.

m. Establish any condominium or cooperative regime with respect to the Mortgaged


Property.

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n. Materially change any unit configurations or change the number of units in the
Mortgaged Property.

VII. ENFORCEMENT

36. VIOLATION OF AGREEMENT. The occurrence of any one or more of the following
shall constitute a "Violation" under this Agreement:

a. Any failure by Borrower to comply with any of the provisions of this Agreement;

b. Any fraud or material misrepresentation or material omission by Borrower, any of its


officers, directors, trustees, general partners, members, managers or managing agent in
connection with (1) any financial statement, rent roll or other report or information
provided to HUD or (2) any request for HUD's consent to any proposed action, including
a request for disbursement of funds from any restricted account for which HUD's prior
written approval is required; and/or

c. The commencement of a forfeiture action or proceeding, whether civil or criminal,


which, in HUD's reasonable judgment, could result in a forfeiture of the Mortgaged
Property or otherwise materially impair the value of the Mortgaged Property.

37. DECLARATION OF DEFAULT.

a. Upon a Violation, HUD may give written Notice, pursuant to Section 46, of the
Violation to Borrower, addressed to the addresses stated in this Agreement, or such
other addresses as may subsequently, upon appropriate written Notice to HUD, be
designated by Borrower as its legal business address. If, after receiving written Notice
of a Violation, that Violation is not corrected to the satisfaction of HUD either within thirty
(30) days after the date Notice is mailed, or within such shorter or longer time set forth
in said Notice, HUD may declare a default (Declaration of Default) under this Agreement
without further Notice. Alternatively, in order to protect the health and safety of the
tenants, HUD may declare a default at any time during the existence of a Violation
without providing prior written Notice of the Violation.

b. Upon any Declaration of Default HUD may:

(i) If HUD holds the Note, declare the whole of said Indebtedness immediately due
and payable and then proceed with the foreclosure of the Security Instrument;

(ii) If said Note is not held by HUD, notify the holder of the Note of such default and
require the holder to declare a default under the Note and Security Instrument,
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and the holder, after receiving such Notice and demand, may declare the
whole Indebtedness due and payable and thereupon proceed with foreclosure of
the Security Instrument or assignment of the Note and Security Instrument to
HUD as provided in Program Obligations. Upon assignment of the Note and
Security Instrument to HUD, HUD may then proceed with the foreclosure of the
Security Instrument;

(iii) Collect all Rents and charges in connection with the operation of the Project and
use such collections to pay Borrower's obligations under this Agreement and
under the Note and Security Instrument and the necessary expenses of
preserving and operating the Mortgaged Property;

(iv)Take possession of the Mortgaged Property, bring any action necessary to


enforce any rights of Borrower growing out of the Mortgaged Property's
operation, and maintain the Mortgaged Property in decent, safe, and sanitary
condition and good repair;

(v) Apply to any court, state or federal, for specific performance of this Agreement,
for an injunction against any Violations of this Agreement, for the appointment of
a receiver to take over and operate the Project in accordance with this terms of
the Agreement, or for such other relief as may be appropriate, as the injury to
HUD arising from a default under any of the terms of this Agreement would be
irreparable and the amount of damage would be difficult to ascertain; and,

(vi)Collect reasonable attorney fees related to enforcing Borrower's compliance with


this Agreement.

38. FORBEARANCE NO WAIVER. Any forbearance by HUD in exercising any right or


remedy under this Agreement or otherwise afforded by applicable law shall not be a
waiver of or preclude the exercise of any right or remedy.

39. MEASURE OF DAMAGES. The damage to HUD as a result of Borrower's breach


of duties and obligations under this Agreement shall be, in the case of failure to
maintain the Mortgaged Property as required by this Agreement, the cost of the repairs
required to return the Project to decent, safe and sanitary condition and good repair.
This contractual provision shall not abrogate or limit any other remedy or measure of
damages available to HUD under any civil, criminal or common law.

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VIII. MISCELLANEOUS

40. COMPLIANCE WITH LAWS.

a. Borrower shall comply with all applicable: laws; ordinances; regulations;


requirements of any Governmental Authority; lawful covenants and agreements
(including the Security Instrument) recorded against the Mortgaged Property; and
Program Obligations including lead-based paint maintenance requirements of 24 C.F.R.
Part 35, subpart G, and any successor regulations; including but not limited to those of
the foregoing pertaining to: health and safety; construction of improvements on the
Mortgaged Property; fair housing; civil rights; zoning and land use; Leases; and
maintenance and disposition of tenant security deposits; and, with respect to all of the
foregoing, all subsequent amendments, revisions, promulgations or enactments.
Borrower shall at all times maintain records sufficient to demonstrate compliance with
the provisions of this Section 40. Borrower shall take appropriate measures to prevent,
and shall not engage in or knowingly permit, any illegal activities at the Mortgaged
Property, including those that could endanger tenants or visitors, result in damage to the
Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise impair
the lien created by the Security Instrument or Lender's interest in the Mortgaged
Property. Borrower represents and warrants to HUD that no portion of the Mortgaged
Property has been or shall be purchased with the proceeds of any illegal activity.

b. HUD shall be entitled to invoke any remedies available by law to redress any breach
or to compel compliance by Borrower with these requirements, including any remedies
available hereunder.

41. BINDING EFFECT. This Agreement shall bind, and the benefits shall inure to,
Borrower, its heirs, legal representative, executors, administrators, successors in office
or interest, and assigns, and to HUD and HUD's successors, so long as the Contract of
Insurance continues in effect, and during such further time as HUD shall be the Lender,
holder, coinsurer, or reinsurer of the Security Instrument, or obligated to reinsure the
Security Instrument.

42. PARAMOUNT RIGHTS AND OBLIGATIONS. Borrower warrants that it has not,
and shall not, execute any other agreement with provisions contradictory of, or in
opposition to, the provisions hereof, and that, in any event, the requirements of this
Agreement are paramount and controlling as to the rights and obligations set forth and
supersede any other requirements in conflict therewith.

43. SEVERABILITY. The invalidity of any clause, part, or provision of this Agreement
shall not affect the validity of the remaining portions hereof.
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44. RULES OF CONSTRUCTION. The captions and headings of the Sections of this
Regulatory Agreement are for convenience only and shall be disregarded in construing
this Regulatory Agreement. Any reference in this Regulatory Agreement to an
"Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Regulatory Agreement or to a
Section of this Regulatory Agreement. All Exhibits attached to or referred to in this
Regulatory Agreement are incorporated by reference into this Regulatory Agreement.
Use of the singular in this Regulatory Agreement includes the plural and use of the
plural includes the singular. As used in this Regulatory Agreement, the term, "including"
means "including, but not limited to." In this Regulatory Agreement, where the context
may so require, feminine or masculine pronouns or adjectives shall be substituted for
those of the neuter gender, and vice versa.

45.PRESENT ASSIGNMENT. Borrower irrevocably and unconditionally assigns,


pledges, mortgages and transfers to HUD its rights to the Rents, charges, fees, carrying
charges, Project accounts, security deposits, and other revenues and receipts of
whatsoever sort that it may receive or be entitled to receive from the operation of the
Mortgaged Property, subject to the assignment of Rents in the Security Instrument.
Until a default is declared under this Agreement, a revocable license is granted to
Borrower to collect and retain such Rents, charges, fees, carrying charges, Project
accounts, security deposits, and other revenues and receipts, but upon a Declaration of
Default under this Agreement or under the Security Instrument, this revocable license is
automatically terminated.

46. NOTICE.

a. All notices, demands and other communications ("Notice") under or


concerning this Agreement shall be in writing. A courtesy copy of any Notice given by
Borrower or HUD shall be sent simultaneously to Lender. Each Notice shall be
addressed to the intended recipients at their respective addresses set forth below, and
shall be deemed given on the earliest to occur of (i) the date when the Notice is
received by the addressee; (ii) the first or second Business Day after the Notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next or second Business Day delivery, respectively; or (iii) the
third Business Day after the Notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. As used in this Section 46, the term
"Business Day" means any day other than a Saturday or a Sunday, a federal holiday or
holiday in the state where the Project is located or other day on which the federal
government or the government of the state where the Project is located is not open for
business. When not specifically designated as a Business Day, the term "day" shall
refer to a calendar day.
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b. Any party to this Agreement and Lender may change the address to which
Notices intended for it are to be directed by means of Notice given to the other party in
accordance with this Section 46. Each party agrees that it shall not refuse or reject
delivery of any Notice given in accordance with this Section 46, that it shall
acknowledge, in writing, the receipt of any Notice upon request by the other party and
that any Notice rejected or refused by it shall be deemed for purposes of this Section 46
to have been received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the courier service.

BORROWER:
EMF SWISS AVENUE, LLC
5005 LBJ Freeway, Suite 1200
Dallas, Texas 75244
Attention: Bradley C. Miller

With a copy to:


EMF SWISS AVENUE, LLC
5005 LBJ Freeway, Suite 1200
Dallas, Texas 75244
Attention: Charles Omage, Esq.

HUD:
U.S Department of Housing and Urban Development
Fort Worth Regional Office
801 Cherry St., Unit #45, Suite 2500
Fort Worth, TX 76102
Attention: Office of Counsel

LENDER:
BERKADIA COMMERCIAL MORTGAGE LLC
323 Norristown Road, Suite 300
Ambler, Pennsylvania 19002
Attention: Vice President, Agency Servicing

47. CONFLICTS PROVISION. Borrower shall comply with the requirements set forth in
this Agreement as well as any other agreement Borrower enters into with
HUD. However, if a conflict exists between this Agreement and any other HUD
agreement executed by Borrower, the agreement which imposes the more restrictive
requirements on Borrower shall control.

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48. THIRD PARTY BENEFICIARY. Borrower agrees that it is not a third-party
beneficiary to the Contract of Insurance between HUD and Lender, as more fully set
forth in 24 C.F.R. Part 207, Subpart B.

49. EXPLANATION OF ROLES. HUD is not providing a loan to the Borrower. HUD
operates insurance programs under the provisions of the National Housing. Act. HUD,
through the Federal Housing Administration (FHA) provides insurance to private and
public lenders which it has approved as financially responsible against loss on
mortgages financing multifamily projects. The mortgage insurance is a contract
between the approved lender and HUD. These are the only two parties to the FHA
insurance contract, the approved mortgage lender and HUD. The approved lender is
the only party that is intended to benefit from the contract of mortgage insurance. While
borrowers and other program participants may incidentally benefit in some manner from
the insured mortgage financing that the approved lender provides, all other program
participants are deemed not to be third party beneficiaries of the insurance contract.
Thus, program participants have no rights and should not have any expectations in
regard to decisions made or actions taken by HUD under the mortgage lender's contract
of mortgage insurance, including but not limited to accepting a loan as eligible for
insurance or paying a claim.

SECTION IX. NON RECOURSE

50. NONRECOURSE DEBT. The addendum ("Section 50 Addendum") attached


hereto is incorporated herein by this reference.

ATTACHED EXHIBITS. The following Exhibits are attached to this Regulatory


Agreement:

IN Exhibit A Description of the Land (required).

12c1. Exhibit B Rider to Regulatory Agreement

[DOCUMENT EXECUTION ON THE FOLLOWING PAGES]

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32

Warning
Any person who knowingly presents a false, fictitious, or fraudulent statement or claim in
a matter within the jurisdiction of the U.S. Department of Housing and Urban Development is
subject to criminal penalties, civil liability, and administrative sanctions.

NOTICE: THIS DOCUMENT MUST HAVE A LEGAL DESCRIPTION ATTACHED AND


BOTH THIS DOCUMENT AND THE SECTION 50 ADDENDUM MUST BE EXECUTED WITH
ALL FORMALITIES REQUIRED FOR RECORDING A DEED TO REAL ESTATE (Le.,
NOTARY/ACKNOWLEDGEMENT, SEAL, WITNESS OR OTHER APPROPRIATE
FORMALITIES).

IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date
first herein above written.

Each signatory below hereby certifies that each of their statements and representations
contained in this Agreement and all their supporting documentation thereto are true,
accurate, and complete and that each signatory has read and understands the terms of
this Agreement. This Agreement has been made, presented, and delivered for the
purpose of influencing an official action of HUD in insuring the Loan, and may be relied
upon by HUD as a true statement of the facts contained therein.

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BORROWER:

EMF SWISS AVENUE, LLC,


a Delaware limited liability company

By: EMF SWISS AVENUE, LP,


a Delaware limited partnership
its Sole Member

By: EMF SWISS AVENUE GP, LLC,


a Delaware limited liability company
its General Partner

By: ENCORE MULTI-FAMILY, LLC,


a Delaware limited liability company
its Sole Member

By:
Bradley C. Miller
Authorized Signat

STATE OF TEXAS
] ss:
COUNTY OF DALLAS

BEFORE ME, the undersigned, a Notary Public in and for said County and State,
on this day personally appeared Bradley C. Miller, known to me to be the Authorized
Signatory of ENCORE MULTI-FAMILY, LLC, a Delaware limited liability company and
the Sole Member of EMF SWISS AVENUE GP, LLC, a Delaware limited liability
company and the General Partner of EMF SWISS AVENUE, LP, a Delaware limited
partnership and Sole Member of EMF SWISS AVENUE, LLC, a Delaware limited
liability company, that executed the foregoing instrument, and acknowledged to me that
such executed the same for the purposes and consideration therein expressed.

Given under my hand seal of office this day of November, 2016.

[SEAL}
TERRI SMITH
Texas
0,
? "!-A Notary Public, State of
Expires 03-29-2018 Notary Public, State of Texas
Pc Comm.
,,,,,,,,,,,, Notary ID 128221592
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U.S. DEPARTMENT OF HOUSING AND


URBAN DEVELOPMENT

By:

Name: Ke,nnti-4/1L. &op e


PrboLu, on Nvisroo rw--
or
Aut Old Agent

STATE OF TEXAS
ss:
COUNTY OF TARRANT

I, a Notary Public in and for the jurisdiction aforesaid, do hereby certify


tbat on the /7 day of November, 2016, personally appeared before me
KERne)t-iA C,cope,r , who, being duly sworn, did
say that he/she is the duly appointed Authorized Agent and acknowledged the
same to be his/her free and voluntary act and deed as Authorized Agent for and
on behalf of the U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.

Given under my hand seal of office thi /7 day of November, 2016.


LESLIE ELAINE JOHNSON
if'y *.f. Notary Public, State of Texas
My Commission Expires ota Public, State of T
March 01, 2018
[SEA '4%/ata"
"",

My Commission Expires: 1. mGIC,V, 1'8

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Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 53 of 63 PageID 83

35
EXHIBIT A
[DESCRIPTION OF THE LAND]

Tract 1:

Being a tract of land located in the City of Dallas, Dallas County, Texas, a portion of the John
Grigsby Survey, Abstract No. 495, a portion of Lot 1A, Block 10/740, SWISS AVENUE BANK-
LIVE OAK ADDITION, an addition to the City of Dallas, Dallas County, Texas, according to the
plat thereof recorded in Volume 96068, Page 2790, Deed Records, Dallas County, Texas, being
all of that called 2.5361 acres tract of land, as described by deed to Borderplex Swiss Avenue,
LLC, as recorded by Instrument No. 201500331119, Official Public Records, Dallas County,
Texas, and being more particularly described as follows:

BEGINNING at a 3" aluminum monument found in the southeast right-of-way line of Live Oak
Street (an 80' public right-of-way) for the west corner of Lot 1C, Block 10/740, BANK OF TEXAS
SWISS AVENUE, PHASE 1, an addition to the City of Dallas, Dallas County, Texas, according
to the plat thereof recorded by Instrument No. 201600072450, Official Public Records, Dallas
County, Texas;

THENCE, departing said southeast right-of-way line and with the southwest line of said Lot 1C,
South 45 degrees 02 minutes 58 seconds East, a distance of 199.26 feet to a 3" aluminum
monument found for the south corner of said Lot 1C;

THENCE, along the southeast line of said Lot 1C, North 45 degrees 06 minutes 00 seconds
East, a distance of 124.48 feet to 3" aluminum monument found in the southwest right-of-way
line of Peak Street (a variable width public right-of-way) for the east corner of said Lot 1C;

THENCE along said southwest right-of-way line as follows:

South 44 degrees 54 minutes 00 seconds East, a distance of 22.98 feet to a 5/8 inch iron rod
with red plastic cap stamped "SCI" set;

South 44 degrees 48 minutes 52 seconds West, a distance of 2.00 feet to a 5/8 inch iron rod
with red plastic cap stamped "SCI" set;

South 44 degrees 54 minutes 00 seconds East, a distance of 417.23 feet to a 3/4 inch iron rod
found at the northerly end of a right-of-way corner-clip;

THENCE, along said corner-clip, South 00 degrees 04 minutes 36 seconds East, a distance of
14.19 feet to a 3/4 inch iron rod found in the northwest right-of-way line of Swiss Avenue (an 80'
public right-of-way);

THENCE, along said northwest right-of-way line, South 44 degrees 44 minutes 49 seconds
West, a distance of 217.73 feet to a 5/8 inch iron rod found for the south corner of said 2.5361
acre tract, same being the west corner of that called 1.36 acre tract of land, as described by

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Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 54 of 63 PageID 84

36
deed to 4125 Swiss LLC, as recorded by Instrument No. 201500124008, Official Public
Records, Dallas County, Texas;

THENCE, along the northeast line of said 1.36 acre tract, North 44 degrees 58 minutes 31
seconds West, passing at a distance of 300.00 feet the north corner of said 1.36 acre tract and
the east corner of Lot 3, Block 10/740, HASKOAK, an addition to the City of Dallas, Dallas
County, Texas, according to the plat thereof recorded by Instrument No. 200900020194, Official
Public Records, Dallas County, Texas, continuing for a total distance of 377.06 feet to a 5/8 inch
iron rod found in the northeast line of said Lot 3;

THENCE along the northeast line of said Lot. 3 as follows:

South 43 degrees 40 minutes 31 seconds West, a distance of 3.37 feet to a 5/8 inch iron rod
with red plastic cap stamped "SCI" set;

North 44 degrees 50 minutes 28 seconds West, a distance of 80.26 feet to a fence corner post
found for the south corner of that tract of land, called Tract 10, as described by deed to L.B.
Billingsly Investment Co., as recorded in Volume 93014, Page 1850, Deed Records, Dallas
County, Texas;

THENCE, along the southeast line of said Billingsly tract, North 44 degrees 37 minutes 36
seconds East, a distance of 74.03 feet to a 1/2 inch iron rod found for the east corner of said
Billingsly tract and an inside ell corner of said 2.5361 acres tract;

THENCE, along the northeast line of said Billingsly tract and the southwest line of said 2.5361
acres tract, North 45 degrees 02 minutes 58 seconds West, a distance of 192.78 feet to 5/8 inch
iron rod found in the southeast right-of-way line of said Live Oak Street;

THENCE, along said southeast right-of-way line, North 44 degrees 40 minutes 06 seconds
East, a distance of 35.00 feet to the POINT OF BEGINNING, and containing 110,474 square
feet or 2.5361 acres of land, more or less.

NOTE: COMPANY DOES NOT REPRESENT THAT THE ABOVE ACREAGE AND/OR
SQUARE FOOTAGE CALCULATIONS ARE CORRECT.

Tract 2: (EASEMENT)

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37

Access Easement executed by BOKF, National Association d/b/a Bank of Texas to Borderplex
Swiss Avenue, LLC, filed December 16, 2015, recorded under Clerk's File No. 201500331121,
Official Public Records, Dallas County, Texas.

Tract 3: (EASEMENT)

Mutual Access Easement Agreement executed by BOKF, National Association d/b/a Bank of
Texas and Borderplex Swiss Avenue, LLC, filed December 16, 2015, recorded under Clerk's
File No. 201500331120, Real Property Records, Dallas County, Texas.

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38

SECTION 50 ADDENDUM

The Loan is nonrecourse. Each individual/entity (each, a "Section 50 party") as


identified below and in the "Firm Commitment" (which means the commitment for
insurance of advances or commitment for insurance upon completion issued to Lender
by HUD under which the debt evidenced by the Note is to be insured pursuant to a
Section of the Act, dated September 2, 2016, and any amendments thereto):

1. Bradley C. Miller

do not assume personal liability for payments due under the Note and Security
Instrument, or for the payments to the Reserve for Replacements, or for matters not
under its control, provided that each Section 50 Party shall be personally liable under
this Agreement only with respect to the matters hereinafter stated; namely: (a) for funds
or property of the Project coming into its hands which, by the provisions hereof, it is not
entitled to retain; (b) for authorizing the conveyance, assignment, transfer, pledge,
encumbrance, or other disposition of the Mortgaged Property or any interest therein in
violation of Section 35(a) of the Regulatory Agreement to which this addendum is
attached ("Regulatory Agreement") without the prior written approval of HUD; and (c)
for its own acts and deeds, or acts and deeds of others, which it has authorized in
violation of the provisions of this Section 50 Addendum. The obligations of each
Section 50 Party shall survive any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, any termination of the Regulatory
Agreement, or any release of record of the Security Instrument.

[SECTION 50 SIGNATURES APPEAR ON THE SUCCEEDING PAGES]

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 57 of 63 PageID 87

39

Bradley C. Mill%

STATE OF TEXAS
] ss:
COUNTY OF DALLAS

BEFORE ME, the undersigned, a Notary Public in and for said County and State,
on this day personally appeared Bradley C. Miller, known to me to be the individual that
executed the foregoing instrument, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed.

Given under my hand seal of office this ct. day of November, 2016.

[SEAL]

Public, State of Texas

Previous editions are obsolete; Regulatory Agreement HUD-92466M (06/14)


Replaces form HUD-92466 (11/02)
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 58 of 63 PageID 88

RIDER TO REGULATORY AGREEMENT

Borrower's Obligation to Maintain Project's Energy Performance as Consideration for


MIP Reduction

This Rider ("Rider") is attached to and amends the Regulatory Agreement entered into between
EMF SWISS AVENUE, LLC, a Delaware limited liability company, and HUD, dated as of
November 1, 2016 ("Regulatory Agreement") concerning a Project known as "Encore Swiss
Avenue Apartments" located at:

4217 Swiss. Avenue, Dallas, Texas 75204

To the extent that any provisions of the Rider conflict with any provisions of the Regulatory
Agreement, the provisions of this Rider shall prevail. Any terms in the Regulatory Agreement
not in conflict with this Rider remain in full force and effect.

Notwithstanding anything else in the Regulatory Agreement to which this Rider is attached:

1. Definitions

The following terms shall be added to Section 1 (Definitions) of the Regulatory Agreement

(a) Any capitalized terms not defined in this Rider shall have the meaning given in the
Regulatory Agreement.
(b) "Green Standard" means an industry recognized standard of building design,
construction, renovation and/or maintenance that results in minimized consumption
of non-renewable energy sources and optimum use of sustainable materials,
resources and methods and is acceptable to HUD.
(c) "Portfolio Manager" means the free software tool provided by the US
Environmental Protection Agency (EPA) for the purpose of reporting and scoring
utility consumption for common types of facilities in the built environment including
multifamily properties, and any successor or amended tool as EPA may from time to
time provide.
(d) "Statement of Energy Performance (SEP)" means a particular report produced by
Portfolio Manager available in various formats providing utility consumption data for
12 month periods with stabilized operations and comparing the energy consumption
per square foot of a subject property to a fixed sample of similar properties by means
of an index score, and any successor or amended report providing an index score
for multifamily properties.
(e) "ENERGY STAR Score" means the 1 to 100 index score produced by Portfolio
Manager and reported on the SEP comparing the energy performance of the subject
property to a sample of other similar properties.
(f) "HUD Custom SEP" is a machine readable format of the SEP which may be a
required format for an SEP when HUD enables electronic or automated reporting.
(g) "Qualified Energy Professional" is a person or firm qualified by education and
experience as described in the Multifamily Accelerated Processing Guide, Chapter 5,
or amended Program Obligations.

Rider to Regulatory Agreement Achievement of Green Standards p. 1of 4


Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 59 of 63 PageID 89

2. Borrower's Election to Achieve a Green Standard for the Project

Borrower has elected and HUD has agreed to reduce the mortgage insurance premium (MIP)
due from the Lender on the Loan in consideration of Borrower's achievement of a recognized
green building standard in accordance with HUD Notice published in Federal Register Nol. 81,
No. 62 /Thursday, March 31, 2016 and entitled "Changes in Certain Multifamily Mortgage
Insurance Premiums and Regulatory Waiver for the 542(c) Risk-Sharing Program" [Docket No.
FR-5876N-03].

The selected green standard is: (choose one, X)

X Choose One:
Enterprise Green Communities Criteria
U.S. Green Building Council's LEED-H
U.S. Green Building Council's LEED-H Midrise
U.S. Green Building Council's LEED-NC
LEED for Existing Buildings: Operations & Maintenance
ENERGY STAR Certification
EarthCraft House
EarthCraft Multifamily
Earth Advantage New Homes
Greenpoint Rated New Home
Greenpoint Rated Existing Home (Whole House or Whole Building label)
X National Green Building Standard (NGBS)
Passive Building Certification or EnerPHit Retrofits certification from the Passive House
Institute US (PHIUS), International Passive House Association, or the Passive House
Institute
Living Building Challenge Certification from the International Living Future Institute
Other (Specify):

3. Borrower's Obligation to Evidence Achievement

Each Green Standard establishes milestones and/or performance levels to be met and
procedures to evidence successful completion or achievement of the milestones or levels of
performance. When all requirements are met the Borrower must provide the Lender and the
Lender must provide HUD with the evidence of achievement as defined by the selected Green
Standard. When achievement is contingent on completion of construction, repairs or
alterations, then evidence, as defined by the Green Standard, that the completion of work is
consistent with the Green Standard must be provided within three months of the completion of
work.

After, and in addition to, meeting the selected Green Standard, a minimum score of 75 or better
on the 1-100 ENERGY STAR score, using a Statement of Energy Performance from EPA's
Portfolio Manager, is required and must be verified by the independent conclusion of a
Qualified Energy Professional. When achievement of the Green Standard is contingent on
completion of construction, the time when the SEP must be delivered varies as follows:
(a) For new construction or substantial rehabilitation projects, the required ENERGY
STAR score Must be provided to HUD not later than 15 months following the
achievement of sustaining occupancy.

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Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 60 of 63 PageID 90

(b) For projects acquired or refinanced under Section 223 of the National Housing Act
with repairs and alterations, the required ENERGY STAR score must be provided
to HUD not later than 15 months following completion of the repairs and alterations.

4. Borrower's Obligation to Maintain Enemy Performance after Initial Achievement

After meeting the requirements of Section 3 above, evidencing the achievement of the selected
green standard, the owner must 'annually evidence continuing energy performance by
submitting to HUD a Statement of Energy Performance (SEP), prepared or verified by a
Qualified Energy Professional and showing a score of 75 or better. If and when HUD enables
submission of machine readable SEPs then the HUD Custom SEP shall be provided. If and
when the utility provider(s) for the Project deliver whole building utility consumption data directly
to Portfolio Manager by means of automatic electronic data transfer protocols, then the
resulting SEP for the Project does not require verification by a Qualified Energy Professional.

5. Projects of Less than 20 Units

Projects of less than 20 units are exempt from requirements to provide an SEP and to evidence
an ENERGY STAR Score of 75 or more.

[SIGNATURE PAGE FOLLOWS]

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BORROWER SIGNATURE PAGE TO RIDER TO REGULATORY AGREEMENT

BORROWER
EMF SWISS AVENUE, LLC,
a Delaware limited liability company

By: EMF SWISS AVENUE, LP,


a Delaware limited partnership
its Sole Member

By: EMF SWISS AVENUE GP, LLC,


a Delaware limited liability company
its General Partner

By: ENCORE MULTI-FAMILY, LLC,


a Delaware limited liability company
its Sole Member

By:
Bradley C. M
Authorized Sig tory

STATE OF TEXAS
] ss:
COUNTY OF DALLAS

BEFORE ME, the undersigned, a Notary Public in and for said County and State,
on this day personally appeared Bradley C. Miller, known to me to be the Authorized
Signatory of ENCORE MULTI-FAMILY, LLC, a Delaware limited liability company and
the Sole Member of EMF SWISS AVENUE GP, LLC, a Delaware limited liability
company and the General Partner of EMF SWISS AVENUE, LP, a Delaware limited
partnership and Sole Member of EMF SWISS AVENUE, LLC, a Delaware limited
liability company, that executed the foregoing instrument, and acknowledged to me that
such executed the same for the purposes and consideration therein expressed.

Given under my hand seal of office this \A day of November, 2016.

[SEAL]

Notary Public, State of Texas


:$1e,
Notary Public, State of Texas
1
R.:SS:.
-

V"1"1"4 TERRI SMITH


141. Comm; Expires 03-29-2018
-; .;i,:t.i.
741 Notary ID 128221592

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EXHIBIT 1-E
Case 3:17-cv-02995-L Document 1-1 Filed 10/30/17 Page 63 of 63 PageID 93
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 1 of 10 PageID 94

EXHIBIT 2
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 2 of 10 PageID 95
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 3 of 10 PageID 96
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 4 of 10 PageID 97
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 5 of 10 PageID 98
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 6 of 10 PageID 99
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 7 of 10 PageID 100

EXHIBIT 2-A
1

Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 8 of 10 PageID 101


Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 9 of 10 PageID 102

EXHIBIT 2-B
Case 3:17-cv-02995-L Document 1-2 Filed 10/30/17 Page 10 of 10 PageID 103

STOP WORK ORDER


WORK PERFORMED ON THESE PREMISES IS IN VIOLATION
OF CHAPTER 52 OF THE DALLAS CITY CODE

ANY PERSON OR PERSONS PERFORMING CONSTRUCTION


RELATED ACTIVITIES WHILE THIS NOTICE IS IN EFFECT
COMMITS AN OFFENSE PUNISHABLE BY A FINE NOT TO
EXCEED $2000 EACH DAY

ADDRESS:
City of Dallas

FOR MORE INFORMATION


IN CALL BUILDING INSPECTION:
PHONE: 9I/g 4160 am- I
Case 3:17-cv-02995-L Document 1-3 Filed 10/30/17 Page 1 of 2 PageID 104

EXHIBIT 4
Case 3:17-cv-02995-L Document 1-3 Filed 10/30/17 Page 2 of 2 PageID 105

CAUSE NO. DC47-02532

PEAK'S ADDITION IN THE DISTRICT COURT


HOME OWNER'S ASSOCIATION,
Plaintiff,

v. 134TH JUDICIAL DISTRICT

CITY OF DALLAS and BOARD OF


ADJUSTMENT FOR THE CITY OF
DALLAS,
Defendants. DALLAS COUNTY, TEXAS

ORDER ON INTERVENOR'S
EMERGENCY MOTION TO STAY ENFORCEMENT OF FINAL JUDGMENT

The Court has considered Intervenor's Emerge cy Motion to Stay Enforcement of Final

Judgment br.pught-pttrstrafft.tetr=lt-r-C-irot4r-3-291,7the response of the Plaintiff thereto, and the

arguments and competent evidence admitted in connection with the motion and has concluded

that the Motion should he overruled and DENIED.

IT IS, THEREFORE, ORDERED that Intervenor's Emergency Motion to Stay

Enforcement of Final Judgment be DENIED.

SIGNED this /3 day of September, 2017.

Hon. Dale B. , prest mg

Pagc solo
Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 1 of 9 PageID 106

EXHIBIT 3
FILED
DALLAS COUNTY
2-CITS ES 3/3/2017 11:16:18 AM
Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 2 of 9 PageID 107 FELICIA PITRE
DISTRICT CLERK

Tonya Pointer
DC-17-02532
Cause No. DC-17-_ _ _ _ __

PEAK'S ADDITION IN THE DISTRICT COURT OF THE


HOME OWNER'S ASSOCIATION,

Plaintiff,

vs. JUDICIAL DISTRlCT


CITY OF DALLAS and BOARD OF
ADJUSTMENT FOR THE CITY OF
DALLAS,

Defendants. DALLAS COUNTY, TEXAS

PLAINTIFF'S ORIGINAL PETITION AND PETITION FOR WRIT OF


CERTIORARI

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW, Plaintiff and file this Original Petition and Petition for Writ of

Certiorari complaining of Defendants City of Dallas, Texas; and the Board of

Adjustment of the City of Dallas, Texas (collectively "Defendants") and for cause of

action would respectfully show the Court the following:

1.
PARTIES

1.1. Plaintiff Peak's Addition Home Owners Association ("PAHA") is a 501(c)(4)

corporation, incorporated in the State of Texas. Peak's Addition Home Owner's

Association is located in Old East Dallas and represents approximately Boo properties

inclusive of 700 residential properties in Peak's Addition. The boundaries of the

neighborhood represented are Haskell to Fitzhugh and Live Oak to Columbia.

1.2. Defendant City of Dallas is a municipal corporation duly organized and

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existing under the laws of the State of Texas. THE CITY OF DALLAS may be

served by serving its MAYOR. MIKE RAWLINGS. DALLAS CITY HALL. 1500

MARILLA, ROOM 5EN, DALLAS, TEXAS 75201.

i.3. Defendant Board of Adjustment is a duly established board of adjustment

created under the laws of the State of Texas. THE BOARD OF ADJUSTMENT

may be served through its SECRETARY, TRENA LAW, DALLAS CITY HALL,

1500 MARILLA, ROOM 5BN, DALLAS, TEXAS 75201.

2.
JURISDICTION

2.1. This Court has subject matter jurisdiction because this action is an appeal

and a petition for writ of certiorari pursuant to Texas Local Government Code

211.ou(a).

2.2. Venue is proper in Dallas County, Texas because the cause of action

occurred in Dallas County and the cause of action involves land located in Dallas

County.

3.
DISCOVERY CONTROL
PLAN

3.1. Discovery in this case is intended to be conducted under Level 3 of Rule

190 of the Texas Rules of Civil Procedure. Pursuant to Texas Rule of Civil

Procedure 47, Plaintiff seeks at least $100,000 and non-monetary relief.

4.
FACTS

4.1. This appeal relates to a challenge brought by Peak's Addition Home Owner's

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Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 4 of 9 PageID 109

Association to the decision of City of Dallas Board of Adjustment to uphold a decision

of the city building official that a proximity slope would not be applied to property

located at 4217 Swiss Avenue in Dallas, Texas, which is located within the boundaries of

the Peak's Addition Home Owner's Association and located within Dallas Planned

Development District 298 (PD 298).

4.2. On or about April 22, 2016, members of the Peak's Addition Home Owner's

Association met with Dallas City Councilman Adam Medrano and a City of Dallas

Assistant Building Official regarding construction that was planned for 4217 Swiss

Avenue in Dallas, Texas, in subdistrict 10 of PD 298. At that time, the Assistant

Building Official advised those present that a residential proximity slope applied to the

planned construction site such that the maximum height of the proposed structure

could not exceed approximately 26 feet.

4.3. Subsequently, Peak's Addition Home Owner's Association learned thatthe

City of Dallas Director of Sustainable Development and Construction, after talking with

representatives of Encore Enterprises-the owner of the subject property-reversed the

earlier decision of the building official and concluded that no residential proximity

slope applied to the planned construction site such that the height of the proposed

structure could reach 62 feet or five stories.

4-4 On or about November 21, 2016, the City of Dallas issued multiple permits

to Encore Enterprises in connection with the proposed construction at 4217 Swiss

Avenue in Dallas Texas. The Dallas Development Code, Section 51A-4. 703(a)(2) allows

any aggrieved person to appeal a decision of an administrative official to the board

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Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 5 of 9 PageID 110

when that decision concerns issues within the jurisdiction of the board. See also TEX.

Loe. Gov'T CODE 21i.01o(a)(1). Peak's Addition Home Owner's Association timely

filed an appeal to the Dallas Board of Adjustment from the issuance of these permits

because the permits did not require the applicant to conform to residential proximity

slopes emanating from the neighboring properties located in PD 298.

4.5. The Dallas Development Code gives the Dallas Board of Adjustment the

power to hear and decide appeals from decisions of administrative officials made in the

enforcement of the zoning ordinances of the city, and to interpret the intent of the

zoning district map when uncertainty exists because the actual physical features differ

from those indicated on the zoning district map and when the rules set forth in the

zoning district boundary regulations do not apply. Dallas Dev. Code 51A-3.102(d);

See also TEX. Loe. Gov'TCODE 211.009(a)(1). Pursuant to Section 51A-3.102(d), Panel

A of the Dallas Board of Adjustment heard the appeal of Peak's Addition Home Owner's

Association on February 21, 2017. In review of a decision of the administrative official,

the board has the same authority as an administrative official and it may reverse or

affirm, in whole or in part, or modify the administrative official's decision or

determination from which an appeal is taken and make the correct decision or

determination. TEX. Loe. Gov'T CODE 21i.009(b). In its review of the administrative

official's decision, the Board of Adjustment voted to uphold the decision of the Director

of Sustainable Development and Construction with respect to the inapplicability of the

residential proximity slope.

4.6. While a board of adjustment may uphold the decision of an administrative

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Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 6 of 9 PageID 111

official, it must do so in accordance with the rules and standards established to

promote compliance with the intent of the subject ordinance. In its review of an

administrative official's decision, the Board is required to make "the correct" decision

or determination. TEX. Loe. Gov'T CODE 211.009(b).

4. 7. Texas Local Government Code Section 211.011 allows any person aggrieved

by a decision of the Board of Adjustment to appeal that decision to a district court.

Peak's Addition Home Owner's Association is aggrieved and does hereby appeal and

asserts that the decision of the Board of Adjustment is illegal in that it renders an

incorrect interpretation and application of the residential proximity slope. The Board

of Adjustment in this case failed to make the "correct" decision or determination. In

particular and without limitation, the Board reached the astounding conclusion that a

city-wide residential proximity slope, i.e., Dallas Development Code 51.A-4.412, does

not apply and project upward and outward "from every site of origination" to an

infinite extent. Plaintiff submits that the Board's conclusion was erroneous and illegal

in part and in whole. Plaintiff requests that this Court reverse the decision of the Board

of Adjustment and render judgment that the 3-to-1 proximity slope found in Dallas

Development Code Section sIA-4-412 applies and projects upward and outward from

subtract 9 of PD 298 and to an infinite extent such that it extends into subtract 10 of

PD 298.

4.8. As a result of the illegal act of the Board of Adjustment, Plaintiffs

member/constituents' property values have been diminished.

5.

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Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 7 of 9 PageID 112

WRIT OF CERTIORARI

5.1. Plaintiff realleges and incorporates paragraphs 1.1 through 4.8 above

as though fully set forth herein.

5.2. Pursuant to 211.011 of the Texas Local Government Code, Plaintiff filed

a petition for writ of certiorari in order to appeal the Board ofAdjustment's decision

of Feb r u a r y 2 1, 2 o 17.

5.3. All conditions precedent to granting the writ have occurred.

6.
DUE PROCESS

6.1. Plaintiff realleges and incorporates paragraphs 1.1 through 5.3 above as

though fully set forth herein.

6.2. The City's and the Board of Adjustment's unfettered, arbitrary, capricious

and unreasonable actions and decisions violate the due process clause of the Texas

Constitution, Article I, Section 19. The portions of the Dallas Development Code and

PD 298 pertinent to this case have clear and attainable standards that the BOA

ignored and violated. As such, Plaintiff has not been afforded due process under the

Texas Constitution.

WHEREFORE, PREMISES CONSIDERED, Plaintiff prays that the Court order

a writ of certiorari to issue herein to the BOA of the City of Dallas, Texas and the

City of Dallas, Texas; that such writ order a review of the decision of the Board of

Adjustment and prescribe the time within which return must be made and service

upon the undersigned attorneys; that such writ direct the Board of Adjustment to

return certified or sworn copies of all the original papers acted upon by it in reaching

PLAINTIFF'S ORIGINAL PETITION AND PETITION FOR WRIT OF CERTIORARI - Page 6 of 8


Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 8 of 9 PageID 113

its decision, together with transcripts of the testimony and proceedings received at

the February 21, 2017 hearing; that upon hearing, the Court enter judgment

reversing the Board of Adjustment and declaring its decision void; and grant Plaintiff

such other and further relief at law or in equity to which it may show itself justly

entitled.

:~p~lysubmi7Y ~
R.Mic~
State Bar No. 15103250
"

COWLES & THOMPSON, P.C.


901 Main Street, Suite 3900
Dallas, Texas 75202
(214) 672-2000 (Telephone)
(214) 672-2020 (Telecopier)
mnorthrup@cowlesthompson.com

ATTORNEYS FOR PLAINTIFF,


PEAK'S ADDITION HOMEOWNER'S
ASSOCIATION

PLAINTIFF'S ORIGINAL PETITION AND PETITION FOR WRIT OF CERTIORARI - Page 7 of 8


Case 3:17-cv-02995-L Document 1-4 Filed 10/30/17 Page 9 of 9 PageID 114

VERIFICATION

State of Texas

County of Dallas

BEFORE ME, the undersigned notary public, on this day personally appeared Jim
Anderson, and upon his oath stated that he has read the foregoing petition and that he has
personal knowledge of the facts stated, and that the facts stated therein are true and correct.

SUBSCRIBED AND SWORN BEFORE ME on March~


witness my hand and official seal.
~ 2017, to certify which

Notary Public In and For the State of Texas

PLAINTIFF'S ORIGINAL PETITION AND PETITION FOR WRIT OF CERTIORARI - Page 8 of 8


Case 3:17-cv-02995-L Document 1-5 Filed 10/30/17 Page 1 of 2 PageID 115

EXHIBIT 5
Case 3:17-cv-02995-L Document 1-5 Filed 10/30/17 Page 2 of 2 PageID 116
CAUSE NO. DC-17-02532

PEAK'S ADDITION
IN THE DISTRICT COURT
HOME OWNER'S ASSOCIATION,

Plaintiff,

v. 134TH JUDICIAL DISTRICT



CITY OF DALLAS and BOARD OF
ADJUSTMENT FOR THE CITY OF
DALLAS,
Defendants. DALLASCOUNT~TEXAS

ORDER ON INTERVENOR'S EMERGENCY MOTION

TO DETERMINE SUPERSEDEAS SECURITY UNDER TRAP 24.2(a)(3)

The Court has considered Intervenor's Emergency Motion to Determine Supersedeas

Security Under TRAP 24.2(a)(3), the response of the Plaintiff thereto, and the arguments of

counsel in connection with the Motion and has concluded that the Motion should be DENIED.

IT IS, THEREFORE, ORDERED that Intervenor's Emergency Motion to Determine

Supersedeas Security Under TRAP 24.2(a)(3) is DENIED.

SIGNED this a f.!P


day of September, 2017.

Page solo
Case 3:17-cv-02995-L Document 1-6 Filed 10/30/17 Page 1 of 23 PageID 117

EXHIBIT 6
1
Case 3:17-cv-02995-L Document 1-6Motion HearingPage 2 of 23 PageID 118
Filed 10/30/17
September 18, 2017

1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUMES
2 TRIAL COURT CAUSE NO. DC-17-02532
3 PEAK'S ADDITION HOMEOWNER'S ) IN THE DISTRICT COURT
ASSOCIATION )
4 )
Plaintiff(s), )
5 )
vs. ) DALLAS COUNTY, TEXAS
6 )
CITY OF DALLAS and BOARD OF )
7 ADJUSTMENT FOR THE CITY OF )
DALLAS )
8 )
Defendant(s). ) 134TH JUDICIAL DISTRICT
9
10
11 _____________________________________________
12 INTERVENORS EMERGENCY MOTION TO STAY ENFORCEMENT OF
SEPTEMBER 11, 2017 FINAL JUDGMENT HEARING
13 _____________________________________________
14
15
16 On the 18th day of September, 2017, the following
17 proceedings came on to be held in the above-titled and
18 numbered cause before the Honorable Dale B. Tillery,
19 Judge Presiding, held in Dallas, Dallas County, Texas.
20 Proceedings reported by computerized stenotype
21 machine.
22
23
24
25

VIELICA DOBBINS, CSR, RPR


2
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September 18, 2017

1 APPEARANCES
2 R. Michael Northrup
SBOT NO. 15103250
3 Cowles & Thompson, P.C.
901 Main Street
4 Suite 3900
Dallas, TX 75202
5 Telephone: 214-672-2000
Fax: 214-672-2020
6 E-mail: Mnorthrup@cowlesthompson.com
Counsel for PLAINTIFF
PLAINTIF
7
JUSTIN H. ROY
8 SBOT NO. 24013428
STACY JORDAN RODRIGUEZ
9 SBOT NO. 11016750
Dallas City Attorneys Office
10 7DN Dallas City Hall
1500 Marilla Street
11 Dallas, TX 75200
Telephone: (214) 670-3519
12 Fax: (214) 670-0622
E-mail: Justin.roy@dallascityhall.com
13 stacy.rodriguez@dallascityhall.com
Counsel for DEFENDANTS
14
CHRISTOPHER D. KRATOVIL
15 SBOT NO. 24027427
ALISON R. ASHMORE
16 SBOT NO. 24059400
Dykema Cox Smith
17 1717 Main Street, Suite 4200
Dallas, Texas 75201
18 Telephone: (214) 462-6400
Fax: (214) 462-6401
19 E-mail: Ckratovil@dykema.com
aashmore@dykema.com
20 Counsel for FOR INTERVENOR EMF SWISS AVENUE, LLC
21
22
23
24
25

VIELICA DOBBINS, CSR, RPR


3
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1 VOLUME 1
2 INTERVENORS EMERGENCY MOTION TO STAY ENFORCEMENT OF
3 SEPTEMBER 11, 2017 FINAL JUDGMENT HEARING
4 September 18, 2017
5 PAGE VOL.
6 Proceedings .......................................4 1
7 Adjournment .....................................21 1
8 Reporter's Certificate ...........................22 1
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

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4
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September 18, 2017

1 P R O C E E D I N G S
2 THE COURT: All right. We're on the
3 record Cause No. DC-17-02532 Peaks Addition Homeowners
4 Association vs. City of Dallas, et al. Announcements and
5 appearance on the record for the moving party, please.
6 MR. KRATOVIL: Yes, Your Honor. Chris
7 Kratovil and Allison Ashmore on behalf of Intervenor and
8 real party and interest EMF Swiss Avenue, LLC. We're
9 with the Dykema Cox Smith firm and we appreciate you
10 taking us in the midst of a jury trial, Your Honor.
11 THE COURT: No problem. For the
12 homeowners association.
13 MR. NORTHRUP: Yes, Your Honor. Mike
14 Northrup for Peaks Addition Homeowners Association.
15 THE COURT: And for the City.
16 MR. ROY: Justin Roy and Stacy Rodriguez.
17 THE COURT: All right. You may proceed.
18 MR. KRATOVIL: Your Honor, Intervenor and
19 real party and interest EMF is here today on an emergency
20 motion and in equity to ask this court to exercise both
21 it's equitable discretion and it's continuing plenary
22 power over a judgment of September 11th 2017. EMF
23 respectfully ask this Court to temporarily suspend the
24 enforcement of that judgment so as to avoid a host of
25 serious and irreparable consequences that will flow from

VIELICA DOBBINS, CSR, RPR


5
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1 it as against EMF and various innocent third parties.


2 These serious consequences are irreparable and they will
3 follow not just EMF and its parent and sibling companies
4 but also 610 innocent workers -- working men and women
5 who count on their paychecks from this project.
6 Let me briefly review what has happened
7 since you have last seen these parties and why we are
8 here today. This past Thursday in compliance with Your
9 Honor's judgment of September 11, 2017 the City of Dallas
10 issued a stop work order bringing an immediate stop
11 cessation to work on the project at 4217 Swiss Avenue.
12 This is very disruptive. While Your Honor still has
13 plenary power to consider post judgment motions and
14 ultimately perhaps an appeal from either the City or from
15 intervenor EMF.
16 First, and most obviously this cessation
17 of work as I noted will put 610 working men and women,
18 blue color workers who work on an hourly basis for EMF's
19 contractor and subcontractors out of a paycheck. These
20 are hourly folks who count on this paycheck to feed their
21 family. EMF will also be irreparably harmed by this
22 because a construction project this size is like a
23 complicated ballet. It's tightly scheduled. Everyone
24 has to come on stage at the right time. That careful
25 schedule and that carefully assembled workforce has now

VIELICA DOBBINS, CSR, RPR


6
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Filed 10/30/17
September 18, 2017

1 fallen by the wayside absent the stay.


2 Second. The financing for this project
3 was through the U.S. Department of Housing and Urban
4 Development or HUD. The stop work order as detailed in
5 the affidavit of the president of the multifamily
6 division of the EMF parent company, Encore, that stop
7 work is possible event of default under the HUD
8 documents. The Housing and Urban Development Department
9 could call this will debt in immediately. It could in
10 theory seize the property. It could red flag EMF and all
11 related entities including Encore and its system. These
12 consequences are described in great detail and Mr. Brad
13 Miller's affidavit that's before Your Honor.
14 THE COURT: Yeah, I read that.
15 MR. KRATOVIL: There's 12 other HUD loans
16 other Encore entities. Those projects are in similar
17 jeopardy could be catastrophic for EMF business as well
18 as for diminution of the amount available affordable
19 housing in this city, a city that badly needs it.
20 Third, again, as detailed in Mr. Miller's
21 affidavit there are 11 EB-5 foreign investors whose
22 immigration status and that of their immediate families
23 is dependent upon this project. They invested in this
24 project and went through the difficult EB-5 visa project
25 or process, excuse me, Your Honor, and they stand to lose

VIELICA DOBBINS, CSR, RPR


7
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1 their EB-5 visas and those of their families if the


2 status of the final judgment remains intact and is not
3 temporarily suspended. These are innocent investors.
4 This is no fault of theirs.
5 Fourth. Construction was not wound down
6 in an orderly fashion. This stop work order from the
7 City came at 5 p.m. on a Thursday and immediately halted
8 activity at the job site. As Your Honor can imagine if
9 the structures, partially constructed structures and
10 fixtures left exposed to the elements and to theft, for
11 example, theft of metal piping and that sort of thing,
12 there would be enormous damage to the job site. At a
13 minimum there should be an orderly wind down of work at
14 this job site not in the middle of things and may be a
15 rest [phonetic] if you will cessation.
16 Fifth. There are enormous financial
17 penalties under the loan documents. It would befall EMF
18 in this event of default. All of these consequences are
19 easily avoidable if Your Honor would just exercise your
20 equitable discretion and your plenary power to stay the
21 enforcement of this judgment through those judgment
22 motions.
23 And then we can come back if we do have to
24 take an appeal and for a bond under TRAP 24.2(a)(3) which
25 would suspend a non-monetary judgment. We could do this

VIELICA DOBBINS, CSR, RPR


8
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1 in an orderly fashion, get a proper bond up, satisfy the


2 Plaintiffs with that bond. We already have $15 million
3 in the ground in this job site.
4 So we're -- we know we're proceeding at
5 our own risk. That's a pretty good bond in it's own
6 right, Your Honor. But if Your Honor wants more
7 security, we would like come back in an orderly fashion,
8 set that security consistent with the Texas Rules of
9 Appellate Procedure and allow this to move forward in an
10 orderly fashion.
11 Now there is a complaint from the other
12 side in their response they filed this morning that Your
13 Honor doesn't have the power to do this. I think it's
14 axiomatic that a trial court has full authority over
15 judgment while you still have plenary power and the
16 Dallas Court of Appeals thinks that too. It said that in
17 Esty v. Beal Bank 298 S.W. 3rd 280. The pinpoint cite is
18 294.95 Texas, Dallas, no petition. It stands for the
19 well known and proposition that you have full authority
20 over your judgment as long as you've got plenary power.
21 You can reverse it. You can modify it.
22 You can suspend it. You can stay it. You can do
23 whatever you need to do with that judgment while you've
24 got plenary power and it's undisputed that Your Honor
25 does.

VIELICA DOBBINS, CSR, RPR


9
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 So in the interest of equity, in the


2 interest of allowing EMF to move forward with this work
3 at it's own risk for the moment and to get proper
4 security up if we do have to take an appeal after post
5 judgment motions are heard and Your Honor adjudicates
6 those post judgment motions, we would ask for a stay of
7 Your Honor's judgment to maintain the status quo.
8 The status quo was that work was going on
9 on this site since well over a year ago. The Plaintiffs
10 never asked for a temporary restraining order. They
11 never asked for a preliminary injunction. They never
12 asked for a permanent injunction.
13 Your existing September 11th judgment is
14 not in the form of an injunction even though the City of
15 Dallas I believe has interpreted it that way and issued
16 this stop work order in compliance with it's
17 understanding of Your Honor's judgment. So the relief
18 we're seeking is a temporary stay until we can come back
19 under the appellate rules and set a proper bond to move
20 forward.
21 THE COURT: Response.
22 MR. NORTHRUP: Yes, Your Honor. One of
23 the things that you did not hear addressed is, is that
24 this intervenor plans to bring the Judge anything new or
25 different than what was presented already to the Court.

VIELICA DOBBINS, CSR, RPR


10
Case 3:17-cv-02995-L Document 1-6Motion Hearing
Filed 10/30/17 Page 11 of 23 PageID 127
September 18, 2017

1 This is a delay tactic. It's -- the order that they


2 requested asked the Court to delay enforcement of it's
3 judgment indefinitely.
4 The other thing we is we have objected to
5 standing of this Intervenor. The Intervenor has
6 represented -- we've object to the affidavit Your Honor
7 as a whole because it's hearsay. It's not a proper means
8 of proving up the injunctive relief that they've asked
9 for essentially.
10 It's not proper for a motion for new trial
11 what is what this motion is styled as a Rule 329b motion.
12 So what we're hearing is they want you to grant the
13 motion for new trial in order to be able to come to court
14 for a motion for new trial which doesn't make any sense.
15 But this intervenor has known about this lawsuit since
16 May 2nd. We presented that in response to the motion for
17 continuance when the intervenor came in.
18 If the Court is not inclined to sustain
19 our objection to this affidavit, Your Honor, I would like
20 to present the Court with certified copies of documents
21 showing that this party is not the property owner of this
22 particular piece of property which is -- and in fact the
23 record before the Court that came from the City shows
24 that an entirely different entity is a property owner
25 than the one that has intervened in this lawsuit.

VIELICA DOBBINS, CSR, RPR


11
Case 3:17-cv-02995-L Document 1-6Motion Hearing
Filed 10/30/17 Page 12 of 23 PageID 128
September 18, 2017

1 Third. What is being asked for here is a


2 stay of the Court's judgment but what really needs to be
3 stayed if anything, is a stop work order not which that
4 that's directed more to the City, Your Honor. And that's
5 an administrative decision.
6 As the record shows --
7 THE COURT: My ruling didn't have a stop
8 order.
9 MR. NORTHRUP: It did not, Your Honor. As
10 the record shows there were at least 20 permits that were
11 issued on the same day as the one single permit that was
12 challenged in this court. It's only that permit that's
13 at issue.
14 It's purely an administrative decision as
15 to why the City of Dallas may have issued a stop work
16 order. We don't know if that stop work order is
17 temporary. In fact, it is my understanding, Your Honor,
18 that the director of development services has been asked
19 to review the stop work order to determine whether this
20 Intervenor can proceed with construction in spite of the
21 one single permit that is at issue in this lawsuit.
22 And so what we don't have -- the only
23 thing we have is opposing counsel statement to this court
24 that that's the reason for the stop work order. We don't
25 have that. We don't have any testimony from the City

VIELICA DOBBINS, CSR, RPR


12
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 saying that's why they issued the work order. We don't


2 have any testimony from the City saying how long that
3 stop work order is going to be in place while they review
4 the other permits to determine whether development can
5 continue.
6 So there's not any reason for this. The
7 mechanism, procedurally, that has been used here is Rule
8 329b. Rule 329b there is not any authority under Rule
9 329b for issuance of a stay over the Court's final
10 judgment. That's the granting of a motion for new trial
11 or to modify, reform or correct an existing judgment.
12 They're not asking for that.
13 The relief they're asking for is to stay
14 enforcement. There are other mechanisms to do that and
15 they have not invoked those mechanisms, Your Honor. In
16 fact you heard him talk about how he would come back and
17 do that at the appropriate time, but this is the not the
18 mechanism.
19 Further, in terms of the injunctive relief
20 and the status quo that they're talking about keeping,
21 they have not established that they have a right to
22 injunctive relief and they have not established in terms
23 of the status quo what is the status quo in this case is
24 the Court's judgment. It's the later stop work order
25 that changed that status quo. That's the status quo.

VIELICA DOBBINS, CSR, RPR


13
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September 18, 2017

1 The status quo that needs to be maintained here is this


2 court's judgment dated September 11.
3 What they want to talk about is something
4 that happened after the Court's judgment, a different
5 decision and there is an administrative remedy for
6 complaining about that. Part of which is to first go to
7 the director of development services and say what's up
8 with this stop work order. How long is it going to be in
9 place? Is it because of this Court's judgment or not
10 because of this Court's judgment? Are we going to be
11 allowed to proceed or not proceed. And if he doesn't
12 allow them to proceed, then there is an internal remedy
13 for doing that.
14 THE COURT: I understand.
15 MR. NORTHRUP: And they have not shown
16 that there is an exception for not pursuing those
17 administrative remedies in this particular case assuming
18 that they even have standing to do so. I would ask that
19 the Court sustain our objection to the affidavit and
20 either ask the intervenor to bring forward its evidence
21 that it does in fact have -- is the property owner and
22 that the records that came from the City are incorrect as
23 to who the property owner is and so I would ask for a
24 ruling on my objection on the affidavit, Your Honor.
25 MR. KRATOVIL: Your Honor, if I might just

VIELICA DOBBINS, CSR, RPR


14
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 briefly by way of response. First of all as to the fact


2 we're not a proper party, there's not a motion to strike
3 this intervention. As Your Honor is aware until there's
4 a motion to strike, we're a party, we're in.
5 Second. Ms. Ashmore is prepared to argue
6 the details of the objection that was filed at about 10
7 this morning. But I will also note for the Court that
8 Mr. Brad Miller, the affiant and the president of Encore
9 Multifamily is here in the courtroom and prepared to
10 testify if that would be useful. I know we're on a break
11 in a jury trial so I would like to avoid that if
12 possible.
13 Also the project manager Mr. Don Jones is
14 here to testify and he is could testify as to the
15 delivery of that stop work order and the message received
16 from the City of Dallas when that stop work order
17 arrived. I will let the City speak for themselves
18 obviously but I think there's no ambiguity that this stop
19 work order was a direct and exclusive result of Your
20 Honor's judgment a week ago, Monday September 11, 2017.
21 THE COURT: City's response.
22 MR. ROY: Your Honor, it is the City's
23 position that we were trying to comply. The stop work
24 order was put in place to comply with your work.
25 THE COURT: My order didn't say stop work,

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15
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 did it?
2 MR. ROY: But the judgment vacates the...
3 THE COURT: My ruling had to do with the
4 appeal of the administrative decision and the procedural
5 problems involved that were brought up and discussed in
6 that appeal. There was no relief requested for me to
7 order a stop work and I didn't order a stop work. In
8 essence they're asking me to interfere with the City's
9 decision. I don't know that that's properly before
10 that's why I asked for your response. I would think if
11 you ordered it, you're going to defend it because I
12 didn't order it. It's not my order.
13 MR. ROY: It was my understanding that the
14 judgment that the relief requested in the summary
15 judgment was to -- was an appeal of the board
16 adjustment's decision as to that permit whether it was
17 valid which vacates that permit essentially.
18 THE COURT: I remember. I was hear for
19 that case. I don't know that you were here arguing, were
20 you?
21 MR. ROY: I wasn't.
22 THE COURT: Yeah, you weren't here arguing
23 it. We went over procedural issues relating to the
24 appeal. I had jurisdictional questions. We went over a
25 lot of things. I didn't order the City to stop work. I

VIELICA DOBBINS, CSR, RPR


16
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 didn't order the construction company to stop work. I


2 just ruled on the administration -- on the administrative
3 issue that was before the Court.
4 Y'all -- the City does a lot of things on
5 a day to day basis that I'm routinely told that I don't
6 have a right to interfere with and I would think you're
7 here to defend it, if you did it. I don't know. If you
8 don't want to defend it, that's a separate issue. I
9 guess that gets -- that gets dealt with somewhere else.
10 So really it's his order to you. It's not my order.
11 MR. KRATOVIL: Your Honor, I could be back
12 with a TRO against the City of Dallas to suspend this
13 stop work order tomorrow, but I think the route of least
14 resistance, the arguments would be identical to what we
15 we've presented as to the irreparable harm.
16 THE COURT: I don't know that I can
17 interfere with their of purpose in making -- municipal
18 decisions. I mean I assume they did that for a reason.
19 They didn't include me in, but it certainly was not the
20 language of my order.
21 MR. KRATOVIL: Your Honor, just to be
22 clear, we're not asking for any injunctive relief today
23 against the City of Dallas. That might be very different
24 tomorrow. In deed we're asking for any injunctive relief
25 whatsoever. All we're asking for is Your Honor in equity

VIELICA DOBBINS, CSR, RPR


17
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 to exercise your broad plenary power as confirmed by the


2 Etsy case to temporarily stay Your Honor's judgment which
3 I think the City has at least indirectly acknowledged
4 would have the effect or that impact of removing this
5 stop work order.
6 THE COURT: I think your request has to go
7 to them. I don't think procedurally I can interfere with
8 the municipalities decision-making in the way that you're
9 requesting and on the record that's before this court
10 right now. I mean, my order does not -- did not cause
11 this. I mean I didn't order anybody to stop work. I
12 didn't order -- I don't know what to say. I don't even
13 know what the City ordered other than what you represent
14 they ordered.
15 MR. KRATOVIL: It's in the papers before
16 your Honor.
17 THE COURT: Well I understand. That's
18 what I know is what you represent that they ordered. The
19 work stoppage, that's a municipality decision that
20 there's an administrative procedure in place for
21 challenging.
22 MR. KRATOVIL: Well, Your Honor, the
23 procedure was prevailing in front of --
24 THE COURT: Well wouldn't you have to
25 exhaust your administrative remedies in challenging that

VIELICA DOBBINS, CSR, RPR


18
Case 3:17-cv-02995-L Document 1-6Motion Hearing
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September 18, 2017

1 decision.
2 MR. KRATOVIL: The only administrative
3 remedy that we're aware of since the board of -- since
4 Your Honor reversed the board of adjustment's ruling
5 would be to seek temporary injunctive relief. If Your
6 Honor is advising us that's what we have to do, we will
7 gladly do so.
8 THE COURT: I'm not giving you legal
9 advice. Based upon the record before me -- I'm
10 sustaining the objection in the affidavit because it's
11 hearsay. I understand the representation that you have
12 made. I think you have to exhaust your administrative
13 remedies with the City's -- with the municipalities'
14 ruling. There's a whole municipality code that goes with
15 these things.
16 Now the flip side is if they go through, I
17 guess the organization is going to be saying they had
18 irreparable harm because the site lines are blocked. So
19 there's going to be irreparable harm either way, I guess.
20 I mean that's the argument. Each side says there's
21 irreparable harm, right?
22 MR. KRATOVIL: Well, Your Honor, the
23 five-story parking garage is already up. So to the
24 extent a blockage would have occurred, it's occurring
25 right now.

VIELICA DOBBINS, CSR, RPR


19
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September 18, 2017

1 THE COURT: Well I think that's kind of


2 the argument, right? That's kind of the argument that if
3 the construction goes through, they would have
4 irreparable harm they would say. You say if the
5 construction doesn't go through certainly your clients
6 have irreparable harm. And all I got to say is at this
7 point in time I ruled on administrative procedure that
8 ruling that was before the court and I just ruled on
9 that. I didn't order The City or anyone else to stop
10 work.
11 MR. NORTHRUP: Your Honor, the City's
12 relying on case law for example Etsy vs -- Howell vs. The
13 Texas Worker's Compensation Commission which is 143
14 S.W.3d 416 which basically says that a party needs to
15 recognize and respect the rights of a judgment and will
16 abide by the judgment in carrying out it's duties. And
17 in our interpretation that was the --
18 THE COURT: I understand.
19 MR. NORTHRUP: The correct method of
20 complying with your order.
21 THE COURT: I understand. That's a
22 decision that y'all make as a municipality. Within what
23 you just read, there are several decisions that could be
24 made. Y'all have chosen and you've made the decision
25 that you felt like you had to in the context of the

VIELICA DOBBINS, CSR, RPR


20
Case 3:17-cv-02995-L Document 1-6Motion Hearing
Filed 10/30/17 Page 21 of 23 PageID 137
September 18, 2017

1 order.
2 I don't think it's right for me to be able
3 to tell you whether or not you had the right and
4 authority to make that decision or whether or not it was
5 an accurate decision. That's all stuff of the municipal
6 code and administrative procedures act. That's just not
7 before me. The merits of their decision to tell y'all to
8 stop work is just not before me so...
9 MR. KRATOVIL: Just for clarity of the
10 record, I did want to be clear that this was not brought
11 under Rule 329. This is not a motion for new trial.
12 This was purely on a motion to stay. We'll certainly be
13 back with a motion for new trial during the period of
14 plenary power, Your Honor. I just offer that for the
15 record.
16 THE COURT: All right.
17 MR. NORTHRUP: Your Honor, the motion
18 speaks for itself. I have a proposed order. So copies
19 to counsel.
20 THE COURT: What does this say? Well he
21 says it's not broad pursuant to 329b.
22 MR. KRATOVIL: He cited 329b merely to
23 reiterate your plenary power, Your Honor.
24 THE COURT: I understand.
25 MR. KRATOVIL: Your Honor, I have no

VIELICA DOBBINS, CSR, RPR


21
Case 3:17-cv-02995-L Document 1-6Motion Hearing
Filed 10/30/17 Page 22 of 23 PageID 138
September 18, 2017

1 objection to this order provided that the reference to


2 329 is.
3 THE COURT: Strike out pursuant to.
4 MR. KRATOVIL: Pursuant to 329b.
5 THE COURT: Strike out brought pursuant
6 to.
7 MR. KRATOVIL: Yes, Your Honor. That
8 whole phrase of.
9 (Simultaneous speakers.)
10 MR. NORTHRUP: I was just quoting his
11 motion.
12 THE COURT: All right. Y'all check that
13 out. Take it around and scan it in.
14 MR. KRATOVIL: Thank you for your time.
15 Good luck with your trial.
16 THE COURT: Thank you.
17 (End of Proceedings.)
18
19
20
21
22
23
24
25

VIELICA DOBBINS, CSR, RPR


22
Case 3:17-cv-02995-L Document 1-6Motion Hearing
Filed 10/30/17 Page 23 of 23 PageID 139
September 18, 2017

1 STATE OF TEXAS
2 COUNTY OF DALLAS
3
4 I, Vielica R. Dobbins, Official Court Reporter in
5 and for the 134th District Court of Dallas, State of
6 Texas, do hereby certify that the above and foregoing
7 contains a true and correct transcription of all portions
8 of evidence and other proceedings requested in writing by
9 counsel for the parties to be included in this volume of
10 the Reporter's Record in the above-styled and numbered
11 cause, all of which occurred in open court or in chambers
12 and were reported by me.
13 I further certify that this Reporter's Record of the
14 proceedings truly and correctly reflects the exhibits, if
15 any, offered by the respective parties.
16 I further certify that the total cost for the
17 preparation of this Reporter's Record is $264.00 and was
18 paid/will be paid by Dykema Cox Smith.
19
20
21 Vielica R. Dobbins, CSR, RPR
Texas CSR No. 6248
22 Official Court Reporter
134th District Court
23 Dallas County, Texas
600 Commerce Street, Suite 650
24 Dallas, Texas 75202
Telephone: (214) 653-7239
25 Expiration: 12/31/2012

VIELICA DOBBINS, CSR, RPR


Case 3:17-cv-02995-L Document 1-7 Filed 10/30/17 Page 1 of 13 PageID 140

EXHIBIT 7
Case 3:17-cv-02995-L Document 1-7 Filed 10/30/17 Page 2 of 13 PageID 141

CAUSE NO. DC-17-02532

PEAKS ADDITION IN THE DISTRICT COURT


HOME OWNERS ASSOCIATION,
Plaintiff,

v. 134TH JUDICIAL DISTRICT

CITY OF DALLAS and BOARD OF
ADJUSTMENT FOR THE CITY OF
DALLAS,
Defendants. DALLAS COUNTY, TEXAS

PLAINTIFFS RESPONSE IN OPPOSITION TO INTERVENORS


EMERGENCY MOTION TO STAY ENFORCEMENT OF FINAL JUDGMENT

TO THE HONORABLE DISTRICT COURT:

Plaintiff, Peaks Addition Home Owners Association (Peaks Addition), files this

Response in Opposition to Intervenors Emergency Motion to Stay Enforcement of the Final

Judgment, and shows the Court the following:

I. Summary overview

Intervenors motion is brought under Rule 329b and as such, it is legally groundless. No

authority supports using Rule 329b to provide the relief Intervenor seeks.

Just as its motion for continuance failed to state that it had any specific material evidence

on the narrow legal issue before the Court, Intervenors emergency motion fails to advise what

specific and material evidence or arguments Intervenor has that the Court has not already seen

and considered. Nonetheless, Intervenor asks to be allowed to continue utilizing a building

permit (Permit No. 1512041028) that is not valid.

Further, by its proposed order Intervenor seeks a permanent mandatory injunction that

replaces the very building permit that this Courts final judgment invalidates. Intervenor

represents in its motion that the relief is only temporary and only for purposes of allowing it to

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file post-trial motions and having them heard. But Intervenor has filed no such motions and

Intervenor would have no need to do so if the Court signs the order Intervenor has tendered.

Intervenor comes to this Court with an emergency motion, making factually groundless

assertions that it had no opportunity to participate in these proceedings. In fact, Intervenor and

its representatives have known about these proceedings at least since May 2, 2017. They chose

not to participate. They knew about and attended the August 30, 2017 hearing without

intervening. They waited until 3 days prior to the September 11, 2017 hearing to intervene and

ask for a continuance.

Further, Intervenor has failed to exhaust its administrative remedies. Intervenor

represents that the City issued a stop work order because of this Courts September 11, 2017

Final Judgment. Intervenor has no competent evidence to support this conclusion. Even if true,

Intervenor has failed to demonstrate that it has exhausted its administrative remedies and it has

failed to demonstrate that the relief it seeks is the only means by which work may resume at the

construction site. Intervenor is not entitled to equitable relief under these circumstances.

Intervenor must exhaust its administrative remedies before seeking relief in district court.

Finally, not only has Intervenor failed to cite any authority authorizing the relief it

requests, but the authority that exists is contrary to the relief Intervenor seeks. Further,

Intervenor cannot meet the elements of proof required to obtain the relief it seeks even if such

relief were available to it.

II. Objections to Intervenors Affidavit

Peaks Addition objects to Intervenors Affidavit of Bradley C. Miller and the documents

attached thereto in the following respects.

The affidavit itself is hearsay and contains hearsay statements within it. Roberts

v. Mullen, 446 S.W.2d 86, 90 (Tex. Civ. App.Dallas 1969, writ refd n.r.e.) (Except in

instances specified by statute or rule (such as summary judgments, pauper's oath proceedings,
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etc.) affidavits are not evidence in contested cases.); see, e.g., Crosby v. Minyard Food Stores,

Inc., 122 S.W.3d 899, 903 Tex. App.Dallas 2003, no pet.) (holding that it was error to admit

affidavit over hearsay objection); see also Millwrits Local Un. v. Rust Engg, 433 S.W.2d 683,

686 (Tex. 1968) (holding that affidavit evidence cannot support injunctive relief if objected to).

Paragraph 5: Peaks Addition objects to affiants statement that EMF is the

owner and developer of the Property. This statement violates the best evidence rule.

Paragraph 8: Peaks Addition objects to this Paragraph because it is not relevant,

it is based upon hearsay, and the affiant has not shown that he is qualified to make this

conclusion. Further, whether the interpretation of the development code was correct is a

question of law for the court.

Paragraph 9: Peaks Addition objects to the statement that the Board upheld the

decision of the Director of Sustainable Development and Construction with respect to the

inapplicability of the RPS. The sworn return of the Board speaks for itself and the affiants

statement is contrary to the record. The sworn return is the best evidence of what occurred.

Paragraph 11: Peaks Addition objects to affiants statement that the City of

Dalas issued a stop work order in direct response to the Final Judgment issued in this case.

Affiant has not demonstrated that he has personal knowledge as to the reasons and impetus for

the issuance of a stop work order. Further, affiants testimony is necessarily based upon hearsay.

Paragraph 14: Peaks Addition objects to affiants statement that HUD likely

will declare a default. This statement is speculative.

Paragraph 15: Peaks Addition objects to affiants statement that if HUD decided

to issue a red flag, it would immediately freeze the remittance of funds for all other loans

Encore entities have pending with HUD This statement is speculative and affiant has not

shown that he is qualified to make the conclusion in the statement.

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Paragraph 16: Peaks Addition objects to the statement that Encore has twelve

major loans pending with HUD. The best evidence of such loans are the loan agreements

themselves. Further, the testimony is hearsay without the documents referenced attached to the

affidavit. Peaks Addition further objects to the statement that these twelve alleged loans could

be negatively impacted as conclusory and speculative.

Paragraph 17: Peaks Addition objection to affiants conclusion that HUD could

preclude all Encore entities from applying for new HUD and FHA loans for the indefinite future.

Affiant has not demonstrated that he is qualified to provide such testimony. The testimony is

speculative and conclusory.

Paragraph 21: Peaks Addition objects to the last sentence of Paragraph 21

characterizing the Stop Work Order and what it allows or does not allow. The best evidence is

the order itself and further, affiant has not demonstrated that he is qualified to attest to what is or

is not allowed.

Paragraph 22: Peaks Addition objects to affiants conclusory statements that the

Stop Work Order will result in additional interest expense and penalties and that the order

constitutes a very severe compliance infraction with EMFs lenders that could ultimately result

in default. These statements are conclusory and affiant has not demonstrated that he is qualified

to render these conclusions. Peaks Addition also objects to affiants statement that the

homeowners almost certainly would not be able to satisfy economic damages. This statement

is conclusory and speculative and affiant has not demonstrated that he has personal knowledge

upon which to base this statement.

Paragraph 23: Peaks Addition objects to affiants statement regarding Encores

twenty years of experience, as affiant has not demonstrated how he is familiar with Encore,

particularly given that he has only been its president for 7 years.

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Paragraph 24: Peaks Addition objects to affiants statement of his belief as to

what the City of Dallas would do if the Court stayed its Final Judgment. This statement is

speculative and conclusory and the statement is legally not sufficient evidence of what it purports

to conclude. Ladymon v. Lewis, No. 05-16-00776-CV , 2017 Tex. App. LEXIS 6849, *12 (Tex.

App.Dallas July 21, 2017, n.p.h.) (An affiants belief about the facts is legally insufficient.).

Paragraph 25: Peaks Addition objects to affiants statement that no harm will

come to Petitioner by maintaining the status quo. This statement is conclusory and speculative

and affiant has failed to demonstrate how he is qualified to make this conclusion.

Peaks Addition requests that the Court sustain each of these objections.

III. Intervenor Lacks Standing

Peaks Addition denies that Intervenor has standing. Intervenor claims to be the property

owner. The sworn record before the Court reflects otherwise. The Defendants sworn return

pursuant to the writ of certiorari states that the Property Owner and holder of the permit that is at

issue in this suit is an entity known as Encore Enterprises. COD-BDA-0154. Intervenors

affidavit recites that EMF is the owner and developer of the Property. The affiant does not

define who EMF is, however, there are two entities that are mentioned in the affidavit that are

described in the affidavit using different names from Intervenor, EMF Swiss Avenue, LLC.

Peaks Addition demands strict proof from the Intervenor demonstrating that it is in fact the

direct owner of record, as Intervenor alleges.

IV. Intervenors grounds for relief are not valid

Intervenors emergency motion states that it is based upon Tex. R. Civ. P. 329bthe

rule applicable to motions for new trial and motions to correct, reform, or modify. But

Intervenor is not seeking modification, correction, or reformation. Thus, the motion must be a

motion for new trial. Rule 329b is not authority for a stay of enforcement of the Courts final

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judgment. Plaintiff has been unable to find any case authority that cite Rule 329b as a basis for

the relief requested in Intervenors motion. Intervenor has not cited any such case authority.

Further, assuming it is Intervenors unstated intent to treat its motion as a motion for new

trial following a default, Intervenor has not alleged and cannot meet the elements of proof for

such a motion. Indeed, as is evidenced by Plaintiffs notice of these proceedings given on May

2, 2017, See Plaintiffs Response in Opposition to Intervenors Motion for Continuance,

Intervenor had notice and consciously chose not to act. Further, Intervenor has not asserted a

meritorious defense and cannot establish that Plaintiff will not suffer any injuryparticularly in

light of the relief requested.

To the extent Intervenor is asking this Court to stay its judgment to postpone appellate

deadlines, the request is improper. See Mackie v. McKenzie, 890 S.W.2d 807, 808 (Tex. 1994).

V. Intervenor has failed to exhaust administrative remedies

Intervenors characterization of the City of Dallas administrative officials issuance of a

Stop Work Order as enforcement of this Courts summary judgment order is incorrect and

misunderstands the nature of this proceeding.

Peaks Addition has taken no action to enforce the Courts Final Judgment. The

Intervenor is complaining of a separate administrative decision of the City of Dallas to issue a

Stop Work Order on September 14, 2017. Intervenor presents no competent evidence that this

Stop Work Order was issued as a result of any action by Peaks Addition, and Intervenor does

not plead that Peaks Addition had any hand in the Stop Work Order. Intervenor represents that

the Stop Work Order result[ed] from the Final Judgment, but Intervenor presents no competent

evidence to support that assertion. Intervenor uses the Stop Work Order as the grounds by

which it seeks to stay this Courts September 14, 2017 Order. These are two separate events.

On its face, the Stop Work Order purports to have been issued by the City of Dallas,

but it does not give the reason for its issuance. Intervenors affiant has failed to demonstrate that
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he has personal knowledge as to the reason for its issuance or whether the order might be

rescinded even if no action is taken by this Court. Moreover, Intervenor asks this Court to accept

the sworn belief of the affiant that if the Court would stay its Final Judgment, the Citys

administrative official will withdraw the Stop Work Order. A sworn belief is not competent

evidence. Ladymon No. 05-16-00776-CV , 2017 Tex. App. LEXIS 6849, at *12.

If the Intervenor disagrees with the stop-work order, Intervenor has an administrative

remedy and it is required to exhaust its administrative remedies. If Intervenor believes the

building official should not have stopped work on the entire project or that Intervenor should be

permitted to wind down activities, the Dallas Development Code provides a mechanism for

challenging the stop-work order. See Dallas Dev. Code 51A-4.703(a)(2). Intevenor cannot

skip that administrative mechanism by going directly to this Court to challenge the stop work

order. 1 See Sumner v. Board of Adjustment, No. 14-15-00149-CV, 2016 Tex. App. LEXIS 5173,

*6 (Tex. App.Houston [14th Dist.] May 17, 2016, pet. denied); see also Plaintiffs

Supplemental Brief in Support of its Motion for Summary Judgment at 2-4.

VI. Intervenors Emergency Motion Lacks Supporting Pleadings, Facts, and Authority

Intervenors Motion lacks both legal and factual authority to support it, and the authority

is to the contrary to the relief requested. Intervenor cites no authority requiring this Court to

grant it the relief it seeks. Further, the factual assertions that Intervenor continues to recitethat

it had no opportunity to take part in these proceedings is factually groundless. Moreover, the law

is contrary to issuance of a stay in this scenario.

Intervenor had notice of these proceedings at least since May 2, 2017. Intervenors

contentions that it had no notice of these proceedings, no opportunity to participate, and that it

had no advance notice that the City might order it to cease work on the construction site are not

1
Further, Intervenor has not asserted that it falls within any exception to the exhaustion-of-
administrative-remedies requirement.
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supported by this record. As demonstrated by Peaks Additions response to Intervenors Motion

for Continuance, the entity holding the permit that was challenged by Peaks Additions appeal

to this Court was advised of these proceedings so that a decision could be made whether to

participate or not participate. Clearly, Intervenor elected not to participate but instead monitored

the proceedings.

There is no authority authorizing a stay of a Courts order issued under Texas Local

Government Code Section 211.011. As this Court is aware from the prior supplemental

briefing, the procedure for review of a municipal Board of Adjustment is unique. See Board of

Adjustment v. Stovall, 216 S.W.2d 171, 172 (Tex. 1949); San Angelo v. Boehme Bakery, 190

S.W.2d 67, 69 (Tex. 1945). Intervenor has cited no case authority authorizing a stay of a district

courts order issued under the procedures outlined in the Local Government Code. Moreover,

Peaks Addition has been unable to find any authority that supports such a stay. Rule 329b,

under which Intervenor says its motion is brought, does not support the granting of a stay.

Further, the Texas Local Government Code forbids the very relief Intervenor is

requesting. Indeed, Section 211.012(c) provides that if a building is constructed or erected in

violation of the subchapter or City ordinances, the municipality may institute an action to restrain

such activity. Tex. Loc. Govt Code 211.012(c); see also Tex. Civ. Prac. & Rem. Code

65.013 (generally forbidding use of injunction to stay a judgment); In re Lowery, No. 05-14-

01509-CV, 2014 Tex. App. LEXIS 13633, *6 (Tex. App.Dallas Dec. 18, 2014, orig.

proceeding) (holding that Section 65.013 allows injunction to stay a judgment that is not

appealable at law). Thus, if the City of Dallas stop work order was issued under the authority

of Local Government Code Chapter 211 or City Ordinance, then the City of Dallas had a legal

right to do so. Countermanding the exercise of that authority by court order would be contrary to

the express terms of the Section 211.012.

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Intervenor is seeking a mandatory injunction that replaces the invalid permit but

Intervenor does not satisfy the required elements. Intervenors emergency motion is a request

for mandatory injunctive relief in all but name. Intervenors request for a stay is based upon

principles of equity. See Garland v. Shepherd, 445 S.W.2d 602, 604 (Tex. Civ. App.Dallas

1969, no writ). As the party seeking injunctive relief, Intervenor must present proof (1) of a

wrongful act; (2) imminent harm; (3) irreparable injury; and (4) the absence of an adequate

remedy at law. Pinebrook Props., Ltd. v. Brookhaven Lake Prop. Owners Ass'n, 77 S.W.3d 487,

505 (Tex. App.Texarkana 2002, pet. denied). Intervenor does not allege that the Citys stop

work order was wrongful. Indeed, if the City issued such a work order based upon the Courts

Final Judgment, then that act was expressly authorized, as discussed above. Further Intervenor

does not allege that it has no adequate remedy at law.

Intervenor is barred by its own acts of delay and unclean hands. Further, even if Intervenor

had established a right to injunctive relief, Intervenors own delay in seeking relief and unclean

hands preclude affording it any relief. Foxwood Homeowners Asso. v. Ricles, 673 S.W.2d 376,

379 (Tex. App.Houston [1st Dist.] 1984, writ refd n.r.e.). Indeed, Intervenor persists in its

groundless assertion that it lacked any opportunity to participate, but as Peaks Additions

Response in Opposition to Intervenors Motion for Continuance shows, Intervenor was made

aware of these proceedings and invited to participate if it so chose as far back as May 2, 2017.

Moreover, Intervenors agents attended the summary judgment hearing held on August 30, 2017.

Even so, Intervenor still refused to intervene until 3 days before the continued hearing on the

parties summary judgment motions. But even when Intervenor did intervene, its pleadings

show that it was well aware of the fact that if this Court granted Peaks Additions motion for

summary judgment, work at 4217 Swiss Avenue might be halted. Thus, Intervenors contention

that the Citys Stop Work Order caught them by surprise and did not allow them to wind down

any work at 4217 Swiss Avenue, is contrary to its own pleaded expectations.
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Intervenors assertions as to the status quo are incorrect. The purpose of a temporary

injunction is to preserve the status quo until a trial on the merits. Frequent Flyer Depot, Inc. v.

Am. Airlines, Inc., 281 S.W.3d 215, 222 (Tex. App.Fort Worth 2009, pet. denied).

Intervenors emergency motion rests upon the unsupported assumption that the status quo is

continued construction of its five-story development. The law does not support this contention.

Further, Intervenors analysis conflates a stay of the Courts Final Judgment with a stay of the

City of Dallas separate decision to issue a stop-work order.

As Intervenors own pleadings acknowledge, the effect of this Courts summary

judgment is to invalidate the permit (Permit No. 1512041028) that is the subject of this suit. It is

well settled that the status quo does not include continuation of illegal conduct. In re Newton,

146 S.W.3d 648, 651 (Tex. 2004); Layton v. Ball, 396 S.W.3d 747, 753 (Tex. App.Tyler 2013,

no pet.). Here, the Court has adjudicated the question presented in Peaks Additions petition.

Intervenor now wishes to treat that adjudication as a nullity for purposes of the injunctive relief

its seeks insofar as keeping the City from issuing a stop work order based upon the Courts

ruling. But doing so allows Intervenor to keep engaging in the illegal conduct, which is not

preservation of the status quo.

Intervenor has no competent evidence that Plaintiff will not be harmed by continued

construction. Intervenors affiant is not competent to testify that Plaintiff will not be harmed by

continued construction at 4217 Swiss Avenue. On more than one occasion, the City Council has

concluded and reaffirmed that Plaintiffs constituent members homes are of historical, cultural

and architectural importance and are significant such that they must be protected. See, e.g.,

Dallas Ordinance No. 22352 (Mar. 8, 1995); see also Dallas Dev. Code 51A-4.702(a)(1)

(expressing that the purpose of a PD is to protect[] contiguous land uses and preserve[]

significant natural features). The very concept of the residential proximity slope is that it

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protects the properties in whose favor it operates; COD-BDA-0036, 0171; thus, the very idea

presented by Intervenors argument is contrary to this purpose.

VII. Prayer and Conclusion

Wherefore, premises considered, Plaintiff requests that the Court deny Intervenors

Emergency Motion to Stay Enforcement of the Courts Final Judgment in all things. Intervenor

requests such further and additional relief to which it has shown itself entitled.

Respectfully submitted,

By: __________________________________
R. MICHAEL NORTHRUP
Texas Bar No. 15103250

COWLES & THOMPSON, P.C.


901 Main Street, Suite 3900
Dallas, TX 75202
(214) 672-2000 (Tel)
(214) 672-2347 (Fax)
E-mail: mnorthrup@cowlesthompson.com

ATTORNEYS FOR PLAINTIFF

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CERTIFICATE OF SERVICE

The undersigned certifies that on the 18th day of September, 2017, a true and correct

copy of the foregoing document was delivered via electronic delivery and hand-delivery to the

counsel of record listed below.

_______________________________
R. Michael Northrup

Christopher C. Gunter Melissa Kingston


Senior Assistant City Attorney Friedman & Feiger, LLP
christopher.gunter@dallascityhall.com 5301 Spring Valley Road, Ste. 200
Sonia T. Ahmed Dallas, Texas 75254
Assistant City Attorney mkingston@fflawoffice.com
sonia.ahmed@dallascityhall.com Counsel for Dallas Homeowners League, et al.
Christopher J. Caso
chris.caso@dallascityhall.com
7DN Dallas City Hall
1500 Marilla Street
Dallas, Texas 75201
Counsel for Defendants

Angela Hunt Christopher D. Kratovil


Munsch Hardt Kopf & Harr, P.C. ckratovil@dykema.com
500 N. Akard St., Suite 3800 Alison R. Ashmore
Dallas, Texas 75201 aashmore@dykema.com
ahunt@munsch.com Cliff P. Riley
Counsel for Preservation Dallas criley@dykema.com
DYKEMA COX SMITH
1717 Main Street, Suite 4200
Dallas, Texas 75201
Counsel for EMF Swiss Avenue, LLC

Page 12
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JS 44 (Rev. 06/17) - TXND (Rev. 06/17) CIVIL COVER
Case 3:17-cv-02995-L Document 1-8 FiledSHEET
10/30/17 Page 1 of 2 PageID 153
The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as
provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the
purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.)

I. (a) PLAINTIFFS DEFENDANTS


EMF SWISS AVENUE, LLC, CITY OF DALLAS

(b) County of Residence of First Listed Plaintiff DALLAS DIVISION County of Residence of First Listed Defendant DALLAS DIVISION
(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF
THE TRACT OF LAND INVOLVED.

(c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known)
Alison R. Ashmore Justin H. Roy, Stacy Rodriguez, Dallas City Attorney's Office
Dykema Cox Smith, 1717 Main Street, Suite 4200, Dallas, TX 75201 1500 Marilla Street, 7DN Dallas City Hall, Dallas, TX 75202

II. BASIS OF JURISDICTION (Place an X in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an X in One Box for Plaintiff
(For Diversity Cases Only) and One Box for Defendant)
1 U.S. Government 3 Federal Question PTF DEF PTF DEF
Plaintiff (U.S. Government Not a Party) Citizen of This State 1 1 Incorporated or Principal Place 4 4
of Business In This State

2 U.S. Government 4 Diversity Citizen of Another State 2 2 Incorporated and Principal Place 5 5
Defendant (Indicate Citizenship of Parties in Item III) of Business In Another State

Citizen or Subject of a 3 3 Foreign Nation 6 6


Foreign Country
IV. NATURE OF SUIT (Place an X in One Box Only) Click here for: Nature of Suit Code Descriptions.
CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES
110 Insurance PERSONAL INJURY PERSONAL INJURY 625 Drug Related Seizure 422 Appeal 28 USC 158 375 False Claims Act
120 Marine 310 Airplane 365 Personal Injury - of Property 21 USC 881 423 Withdrawal 376 Qui Tam (31 USC
130 Miller Act 315 Airplane Product Product Liability 690 Other 28 USC 157 3729(a))
140 Negotiable Instrument Liability 367 Health Care/ 400 State Reapportionment
150 Recovery of Overpayment 320 Assault, Libel & Pharmaceutical PROPERTY RIGHTS 410 Antitrust
& Enforcement of Judgment Slander Personal Injury 820 Copyrights 430 Banks and Banking
151 Medicare Act 330 Federal Employers Product Liability 830 Patent 450 Commerce
152 Recovery of Defaulted Liability 368 Asbestos Personal 835 Patent - Abbreviated 460 Deportation
Student Loans 340 Marine Injury Product New Drug Application 470 Racketeer Influenced and
(Excludes Veterans) 345 Marine Product Liability 840 Trademark Corrupt Organizations
153 Recovery of Overpayment Liability PERSONAL PROPERTY LABOR SOCIAL SECURITY 480 Consumer Credit
of Veterans Benefits 350 Motor Vehicle 370 Other Fraud 710 Fair Labor Standards 861 HIA (1395ff) 490 Cable/Sat TV
160 Stockholders Suits 355 Motor Vehicle 371 Truth in Lending Act 862 Black Lung (923) 850 Securities/Commodities/
190 Other Contract Product Liability 380 Other Personal 720 Labor/Management 863 DIWC/DIWW (405(g)) Exchange
195 Contract Product Liability 360 Other Personal Property Damage Relations 864 SSID Title XVI 890 Other Statutory Actions
196 Franchise Injury 385 Property Damage 740 Railway Labor Act 865 RSI (405(g)) 891 Agricultural Acts
362 Personal Injury - Product Liability 751 Family and Medical 893 Environmental Matters
Medical Malpractice Leave Act 895 Freedom of Information
REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS 790 Other Labor Litigation FEDERAL TAX SUITS Act
210 Land Condemnation 440 Other Civil Rights Habeas Corpus: 791 Employee Retirement 870 Taxes (U.S. Plaintiff 896 Arbitration
220 Foreclosure 441 Voting 463 Alien Detainee Income Security Act or Defendant) 899 Administrative Procedure
230 Rent Lease & Ejectment 442 Employment 510 Motions to Vacate 871 IRSThird Party Act/Review or Appeal of
240 Torts to Land 443 Housing/ Sentence 26 USC 7609 Agency Decision
245 Tort Product Liability Accommodations 530 General 950 Constitutionality of
290 All Other Real Property 445 Amer. w/Disabilities - 535 Death Penalty IMMIGRATION State Statutes
Employment Other: 462 Naturalization Application
446 Amer. w/Disabilities - 540 Mandamus & Other 465 Other Immigration
Other 550 Civil Rights Actions
448 Education 555 Prison Condition
560 Civil Detainee -
Conditions of
Confinement
V. ORIGIN (Place an X in One Box Only)
1 Original 2 Removed from 3 Remanded from 4 Reinstated or 5 Transferred from 6 Multidistrict 8 Multidistrict
Proceeding State Court Appellate Court Reopened Another District Litigation - Litigation -
(specify) Transfer Direct File
Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
Takings Clause of the Fifth Amendment of the United States Constitution
VI. CAUSE OF ACTION Brief description of cause:
Taking of Real Property by the City of Dallas
VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint:
COMPLAINT: UNDER RULE 23, F.R.Cv.P. JURY DEMAND: Yes No
VIII. RELATED CASE(S)
(See instructions):
IF ANY JUDGE DOCKET NUMBER
DATE SIGNATURE OF ATTORNEY OF RECORD
10/30/2017 Alison R. Ashmore
FOR OFFICE USE ONLY

RECEIPT # AMOUNT APPLYING IFP JUDGE MAG. JUDGE

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JS 44 Reverse (Rev. 06/17) - TXND (Rev. 06/17)
Case 3:17-cv-02995-L Document 1-8 Filed 10/30/17 Page 2 of 2 PageID 154
INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44
Authority For Civil Cover Sheet

The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pleading or other papers as
required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is
required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of
Court for each civil complaint filed. The attorney filing a case should complete the form as follows:

I.(a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency,
use only the full name or standard abbreviations. If the plaintiff or defendant is an official within a government agency, identify first the agency and
then the official, giving both name and title.
(b) County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at
the time of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land
condemnation cases, the county of residence of the "defendant" is the location of the tract of land involved.)
(c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment,
noting in this section "(see attachment)".

II. Jurisdiction. The basis of jurisdiction is set forth under Rule 8(a), F.R.Cv.P., which requires that jurisdictions be shown in pleadings. Place an
"X" in one of the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below.
United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here.
United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an "X" in this box.
Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the United States, an amendment
to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes
precedence, and box 1 or 2 should be marked.
Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. When Box 4 is checked, the
citizenship of the different parties must be checked. (See Section III below; NOTE: federal question actions take precedence over diversity
cases.)

III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversity of citizenship was indicated above. Mark
this section for each principal party.

IV. Nature of Suit. Place an "X" in the appropriate box. If there are multiple nature of suit codes associated with the case, pick the nature of suit
code that is most applicable. Click here for: Nature of Suit Code Descriptions.

V. Origin. Place an "X" in one of the seven boxes.


Original Proceedings. (1) Cases which originate in the United States district courts.
Removed from State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C., Section 1441.
When the petition for removal is granted, check this box.
Remanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filing
date.
Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date.
Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or
multidistrict litigation transfers.
Multidistrict Litigation Transfer. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C.
Section 1407.
Multidistrict Litigation Direct File. (8) Check this box when a multidistrict case is filed in the same district as the Master MDL docket.
PLEASE NOTE THAT THERE IS NOT AN ORIGIN CODE 7. Origin Code 7 was used for historical records and is no longer relevant due to
changes in statue.

VI. Cause of Action. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite
jurisdictional statutes unless diversity. Example: U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service

VII. Requested in Complaint. Class Action. Place an "X" in this box if you are filing a class action under Rule 23, F.R.Cv.P.
Demand. In this space enter the actual dollar amount being demanded or indicate other demand, such as a preliminary injunction.
Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.

VIII. Related Cases. This section of the JS 44 is used to reference related pending cases, if any. If a related case exists, whether pending or closed,
insert the docket numbers and the corresponding judge names for such cases. A case is related to this filing if the case: 1) involves some or all of the
same parties and is based on the same or similar claim; 2) involves the same property, transaction, or event; 3) involves substantially similar issues of
law and fact; and/or 4) involves the same estate in a bankruptcy appeal.

Date and Attorney Signature. Date and sign the civil cover sheet.

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